The Government of Canada has proposed new measures to provide tax cuts and increased benefits to all Canadian families with children.
A New Family Tax Cut
Couples with children under the age of 18 can claim a tax credit worth up to $2,000, starting in the 2014 tax year.
The Government is proposing a new Family Tax Cut, a federal non-refundable tax credit worth up to $2,000 for couples with children under the age of 18.
The Family Tax Cut would allow a spouse to, in effect, transfer up to $50,000 of taxable income to a spouse in a lower income tax bracket, providing tax relief up to a maximum of $2,000. Tax relief is calculated on the basis of a difference in federal tax before and after the effective transfer of income.
The Family Tax Cut would take effect starting in the 2014 tax year. Couples would be able to claim the credit when they file their 2014 tax returns. To benefit from the credit, each spouse must file a tax return. Either spouse may claim the credit.
More than 1.7 million families are expected to benefit from the new Family Tax Cut.
Enhancing the Universal Child Care Benefit
Starting in 2015, parents can receive up to $1,920 per year for each child under the age of 6 and $720 per year for children aged 6 through 17.
In 2006, the Government introduced the Universal Child Care Benefit (UCCB), which provides all families with up to $1,200 per year for each child under the age of 6. The UCCB currently provides direct federal support to approximately 1.7 million families with young children.
Now, the Government is proposing to enhance the UCCB by providing up to $1,920 per year for each child under the age of 6, and introducing a new benefit of up to $720 per year for children aged 6 through 17.
The UCCB enhancements would take effect starting January 2015 and would begin to be reflected in monthly payments to recipients in July 2015, pending parliamentary approval of the necessary legislation. The July 2015 payment would include up to six months of benefits to cover the January to June 2015 period. About 4 million families are expected to benefit from these enhancements. These enhancements to the UCCB would replace the Child Tax Credit, starting in the 2015 tax year.
Doubling of the Children’s Fitness Tax Credit
Parents can claim up to $1,000 per child to help pay for their activities.
On October 9, 2014, the Government announced its intention to double the Children’s Fitness Tax Credit (CFTC) and make it refundable to further help families who enroll their children in eligible fitness activities. Making the tax credit refundable would ensure that even those who do not earn enough to pay income taxes benefit from this measure.
Parents would be able to take advantage of the new $1,000 maximum limit in the spring of 2015 when they file their tax returns for 2014. The credit would be made refundable beginning in the 2015 tax year, increasing benefits to low-income families claiming it for that year and subsequent years.
The CFTC was introduced by the Government in 2006 to help promote physical fitness among children by making it more affordable for Canadian families to register their kids in fitness activities. When fully implemented, the enhancements to the CFTC would fulfill a commitment made by the Government in 2011. The enhancements would deliver additional tax relief to about 850,000 families who enroll their children in eligible fitness activities.
Child Care Expense Deduction
The CCED allows child care expenses to be deducted from income when those expenses are incurred to earn employment or business income, pursue education or perform research. The Government is proposing a $1,000 increase to the maximum dollar amounts that could be claimed, starting in the 2015 tax year.
The Child Care Expense Deduction (CCED) allows child care expenses to be deducted from income when those expenses are incurred to earn employment or business income, pursue education or perform research. Generally, only the lower-income spouse can claim the CCED.
Currently, the maximum amount that can be claimed under the CCED each year is limited to the least of:
- the total amount spent on child care expenses;
- two-thirds of the lower-income taxpayer’s earned income; and
- the total of the maximum dollar limits for all children, that is $7,000 per child under age 7, $4,000 for each child aged 7 through 16 (and for infirm dependent children over age 16), and $10,000 for children who are eligible for the Disability Tax Credit, regardless of their age.
The Government proposes to increase the dollar limits of the CCED by $1,000—i.e., to $8,000 from $7,000 per child under age 7, to $5,000 from $4,000 for each child aged 7 through 16 (and for infirm dependent children over age 16), and to $11,000 from $10,000 for children who are eligible for the Disability Tax Credit.
These changes would apply for the 2015 and subsequent taxation years, and would benefit more than 200,000 families.