Cash in With Your Kids This Tax Season
Deductions for Parents
By Nizam Shajani, CPA, CA, MBA
Kids are expensive – however you can recoup some of these costs via tax savings when filing your personal returns. Get credit for being a parent. Here are some tips to save on tax if you have children.
Canada Child Benefit is a tax free payment available for children under the age of 18. This replaces the previous Canada Child Tax Benefit. The amount of benefit you receive depends on the number of children you have and your family net income. The benefit is calculated every July based on your previous year tax filings and paid over twelve months.
To be eligible, you must live with the child and be he person primarily responsible for the care and upbringing of the child.
The benefit is based on your family income. The maximum eligibility is $6,496 per year ($541.33 per month) for each child under the age of six and $5,481 per year ($456.75 per month) for each child aged six to seventeen. However, these amounts are reduced based on your adjusted family income (AFNI) as follows:
- for families with one eligible child, the reduction is 7% of the amount of AFNI between $30,450 and $65,975, plus 3.2% of the amount of AFNI over $65,975
- for families with two eligible children, the reduction is 13.5% of the amount of AFNI between $30,450 and $65,975, plus 5.7% of the amount of AFNI over $65,975
- for families with three eligible children, the reduction is 19% of the amount of AFNI between $30,450 and $65,975, plus 8% of the amount of AFNI over $65,975
- for families with four or more eligible children, the reduction is 23% of the amount of AFNI between $30,450 and $65,975, plus 9.5% of the amount of AFNI over $65,975
Note if your adjusted net family income is greater than $65,975, you would not receive any Canada Child Benefit.
Child Care Expenses are amounts paid to have someone look after your child so that you could earn income from employment, carry on a business, attend school or carry on research for which you received a grant.
The costs may generally be deducted by the lower income spouse to a maximum of $8,000 for children under age seven and $5,000 for children aged seven through sixteen.
Payments may include the following:
- caregivers providing child care services
- day nursery schools and daycare centers
- educational institutions, for the part of the fees that relate to
child care services
- day camps and day sports schools where the primary goal
of the camp is to care for children (an institution offering a
sports study program is not a sports school)
- boarding schools, overnight sports schools, or camps where
lodging is involved
Tuition credits are available for post-secondary students for 2018. Canadian institutions will provide a tax certificate with the total eligible fees paid for the tax year. Fees paid to an institution outside of Canada will qualify if it develops or improves skills in an occupation and the institution has been certified by Employment and Social Development Canada. The course should have been taken in the year of the claim.
To make the claim you will need an official tax receipt or a completed form T2202A from the institution. If the fees were to an institution outside of Canada, you will need form TL11A or TL11C completed by your institution.
The student has to claim the current year’s federal tuition fees on their own return. If there is no tax owing, they have a choice to either carry this amount forward or to transfer all or a portion of the amount to a designated person. They can transfer a maximum of $5,000 less the amount they claimed. However, previous year carry forward amounts cannot be transferred. The student will have to complete schedule 11 and the back of the T2202A, TL11A, TL11B or TL11C.
Credit for Student Loan Interest can also be claimed or carried forward for five years.
Moving expenses to attend post-secondary school may also be deductible under certain circumstances.
This information is for discussion purposes only and should not be considered professional advice. There is no guarantee or warrant of information on this site and it should be noted that rules and laws change regularly. You should consult a professional before considering implementing or taking any action based on information on this site. Call our team for a consultation before taking any action. © 2020 Shajani LLP