The article “Parents, Don’t Miss Out On These Four Tax Deductions and Credits” was originally published on The Financial Post on March 6, 2015.
The Family Tax Cut has been hogging the limelight among Canada’s recent tax changes. But chances are you’ll benefit more from four other new tax measures. There’s nothing proactive about the Family Tax Cut anyway: It will happen automatically when your accountant does your tax return. It’s much more important to be aware of the tax deductions and credits you qualify for and proactively keep receipts, file applications and claim things by the books.
Children’s Fitness Tax Credit: Increased to $1,000 from $500
According to the federal government, 1.4 million families are claiming the credit currently. This is only one-quarter of Canada’s 5.6 million families with children, so many are likely missing the credit.
This credit has been around since 2006, but it’s now $1,000 instead of just $500. It’s worth 15% of registration or membership fees for eligible activities such as hockey or gymnastics – up to $150 of savings per child each year.
Tip: Before you automatically claim an expense under the fitness tax credit, consider if it’s actually an eligible child care expense instead. Your tax savings might be higher, because child care expenses are deductions and save tax at your marginal tax rate (up to 50% depending on your province and your income).
Universal Child Care Benefit: Increased to $1,920 from $1,200 for children under 6; and a newly introduced $720 for children 6 to 17
The Universal Child Care Benefit, previously $1,200, stopped when a child turned 6, but as of July 2015 it will continue at $720 per year for each child aged 6 through 17. It will be back-dated to January 2015, so retroactive payments will be made for the first six months of the year – up to $960 per child under 6 or $360 for those over 6.
Tip: Parents who received the UCCB before their children turned 6 do not need to re-apply, nor do those who are currently receiving it. Everyone else needs to file the Canada Child Benefits Application prior to July 2015 to qualify.
Child Care Expense Deduction: $1,000 increase, but can’t claim until 2015 tax filing
A tax deduction is allowed for child care expenses paid by working parents. Up to and including the 2014 tax year, the dollar limits are $7,000 per child under age 7 and $4,000 per child aged 7 to 16. Those dollar limits are being increased by $1,000 each, but parents won’t benefit until next spring on their 2015 income tax filing. These limits are still below the total cost of child care for many children, but more of that cost will be tax-deductible.
Tip: Does a family member provide child care for your kids under the table? It could be a double whammy. They’re supposed to report the income, so not claiming it is wrong. Worse, a retired parent or a stay-at-home sister may pay very little tax when claiming the income, whereas you might save a lot of tax claiming the deduction.
Adoption Expense Tax Credit: Increased to $15,000 from $11,774 (and indexed thereafter)
Although this credit isn’t widely applicable, for those who are adopting, it’s an urgent need and a real incentive. Ottawa is trying to “better recognize the costs unique to adopting a child.”
This tax credit provides tax savings of 15% of the $15,000, so up to $2,250 in your pocket.
Jason Heath is a fee-only Certified Financial Planner (CFP) and income tax professional for Objective Financial Partners Inc. in Toronto, Ontario.
