Parents and tax
If you have children, there are various tax credits and deductions you can claim on your tax return.
4 main tax credits
1. Child Tax Credit
For the 2014 tax year, you can still claim a non-refundable tax credit in the amount of $2,255 for each of your children who are under 18 years old at the end of the year.
If 2 or more families share a home, each eligible parent can claim the credit with respect to their own children. Prior to 2011, only 1 person per “domestic establishment” could claim this tax credit.
However, an announcement on October 30, 2014 by the federal government included a proposal to replace the Child Tax Credit for 2015 and subsequent tax years with the enhanced Universal Child Care Benefit, discussed below under 2 child benefits.
2. Children’s fitness amount
You can claim this tax credit if your children are registered in ongoing physical activities or classes. On October 9, 2014, a proposal was announced to increase the maximum amount per child from $500 to $1,000 for the 2014 and subsequent tax years. In 2014 you can claim 15% of the fees you pay as a non-refundable tax credit of up to $150. However, for 2015 and subsequent tax years, the children’s fitness amount will become a refundable tax credit. Learn more about the changes to the children’s fitness amount.
3. Children’s Arts Tax Credit
You can claim this tax credit if your children are registered in art, music or cultural activities or classes. You can claim up to $500 per child each year. The maximum credit for the Children's Arts Tax Credit is $75 for each child.
Learn more about the Children’s Arts Tax Credit by watching this video
from the Canada Revenue Agency.
4. Family Tax Cut
An announcement on October 30, 2014 by the federal government proposed a new non-refundable tax credit called the Family Tax Cut. The purpose of the tax credit is to make the tax burden fairer for families. Under Canada’s tax system, federal personal income tax rates increase with the level of taxable income of the individual. So a couple in which one individual has a higher taxable income than the other often pays more federal income tax than a couple where both individuals have equal taxable income.
This non-refundable tax credit of up to $2,000 will be for eligible couples who live with children under 18 (at the end of the year). In order to be eligible, you must:
- not be separated for more than 90 days including December 31, 2014,
- both be residents of Canada on December 31, 2014, and
- both file a tax return for the year this credit is claimed.
You will not be eligible if during the year, you:
- were in prison for at least 90 days
- became bankrupt, or
- elected to split eligible pension income.
The Family Tax Cut is based on the net reduction of federal tax that would result if up to $50,000 of one person’s taxable income was transferred to their spouse or common-law partner, to take advantage of the spouse’s lower tax bracket. (Note that no income is actually being transferred from one taxpayer to another and it won’t impact your provincial taxes. This “income splitting” is notional only.)
The new credit will be effective for the 2014 and subsequent tax years. To claim it, complete Schedule 1-A, Family Tax Cut.
2 child benefits
1. Canada Child Tax Benefit (CCTB)
If you have children under age 18, you may qualify for this tax-free monthly payment. The amount of benefits is based on the net family income of the parents. To apply for the CCTB, complete Form RC66 Canada Child Benefits Application.
2. Universal Child Care Benefit (UCCB)
If you have children under age 6, you're currently eligible to receive $100 a month per child for the UCCB. Effective January 1, 2015, this amount will be increasing to $160 per month. Parents may also receive a payment of $60 per month for eligible children ages six through 17.
Payments will start in July 2015. You will receive a lump sum payment covering up to six months of benefits from the period January to June 2015. You will also begin receiving the enhanced monthly payments in July 2015. You automatically apply for the UCCB when you apply for the CTB. If you currently receive the UCCB or CTB, you do not have to apply for the increased UCCB – it will be applied automatically.
The UCCB is taxable in the hands of the lower-income spouse or common-law partner. If you're a single parent, you can have the UCCB taxed in the hands of your dependent children. This means $288 in tax relief for single parents with 1 child under age 6.
You don't pay tax on money you receive from the Child Tax Benefit. But you do pay tax on money you receive from the Universal Child Care Benefit. Parents who are separated and share custody of a child can choose to split each of these benefits.
Deductions for child care expenses
You can deduct the costs of having someone look after your children under age 16 (at some time during the year) while you work or go to school. You must have “earned income" to claim deductions for child care expenses.
What you can claim
- Amounts paid to a daycare centre
- Amounts paid to a caregiver – must be a Canadian resident and have a social insurance number, but cannot be the child's father or mother, or a person under age 18 who is related to you
- The portion of school fees that relate to child care services
- The cost of day camps and boarding schools.
How much you can claim
You can claim the lower of:
- 2/3 of your earned income, and
- the actual amount you paid for child care.
The maximum you can claim per child each year is:
- $7,000 for children under age 7
- $4,000 for other eligible children
- $10,000 for children who qualify for the disability tax credit.
Beginning in the 2015 tax year, the dollar limits above will increase by $1,000 i.e. to $8,000 for children under age 7, to $5,000 for other eligible children 7 – 16, and to $11,000 for children eligible for the disability tax credit.
How to claim
The spouse or common-law partner with the lower income must claim the deduction. File Form T778, Child Care Expenses Deduction. Don't include your receipts but keep them as proof of your claim.
Adoption Expense Tax Credit
You can claim an amount for adoption expenses related to adopting a child under the age of 18. The maximum claim for each child is $15,000 in 2014, for tax savings of $2,250. The amount will be indexed to inflation after 2014.
For adoptions that are finalized in 2013 or later, the adoption tax credit has been enhanced to help offset costs incurred before parents are matched with a child.
Learn more about claiming adoption expenses.
Saving for your child's education in an RESP
Contributions to your child's RESP
are not tax deductible, but you won't be taxed on any income earned while the funds remain in the plan. If you save for a child age 17 and under, the federal government and some provincial governments will also put money into the RESP as a grant or bond. Accumulated earnings and government grants are taxable income to the student in the year they are paid out. Contributions can be withdrawn tax free.