While becoming a parent or growing your family is a rewarding personal experience, it can be just as beneficially financially.
And it’s not just limited to the cost savings of eventually having a live-in snow removal specialist or landscaper.
But based on a TurboTax survey conducted before Canadians filed their 2016 returns last spring, it appears many parents are not taking full advantage of the tax benefits designed to help them recoup child-care related expenses.
The survey found that only seven per cent of Canadians said they would claim the Child Care Expenses Deduction (CCED), valued at $8,000 for each child aged six and under and $5,000 for those between the ages of 7 and 16. For parents with disabled dependents, the amount is $11,000 for those 16 and under, and $5,000 if the child is over 16 and doesn’t qualify for the disability tax credit.
With the income-splitting Family Tax Cut eliminated, along with the arts, fitness and textbook tax breaks, the CCED is the best option left for parents.
Among eligible expenses are fees for daycare, nursery school, boarding school. The cost of day camps or sports camps where the primary purpose is child care are also eligible.
Among the long list of ineligible expenses that parents can claim are swimming lessons, scouts, medical or hospital care bills, clothing and transportation.
For those that use home-based day care, unless the child care provider is providing you with receipts that include either a business registry number or social insurance number, the Canada Revenue Agency won’t deem it eligible.
And while payments made to relatives under the age of 18 —an older child, cousin, niece or nephew — are not eligible, those made to a grandparent who provides child care is. The caveat here, however, is the potential tax impact additional income could have on their own benefits, like Old Age Security.
In a family where one parent is self-employed and the other’s primary duty is child care, they should consider paying a salary to the latter to bring them up the minimum earned income of $11,635.
As for who should be making the claim, the CRA advises that in most cases should always be the parent with the lower net income and the total deduction is limited to two-thirds of that number.
Now, if you’re a parent with an older child well into the throes of academia at the post-secondary level on your dime, there’s recompense for you, too, by way of transferred tuition tax credits capped at $5,000.
While students can retain tax credits all the way through until graduation, tax specialists generally advise that parents paying or contributing towards educational expenses should encourage their kids to maybe sign them over.
If they need convincing, tell them the taps will be shut off otherwise.
On the complete other end of the spectrum, if you became a sleep-deprived parent for the first time in 2017 there are a few things you should keep in mind come tax time.
For instance, many medical expenses incurred as a result of the pregnancy — whether for a hospital staff or fertility treatments — can be claimed.
Chances are when your child’s birth was registered it was also registered with the automated benefits application. In doing so, you automatically apply for the Canada Child Benefit (CCB), a tax-free monthly payment from CRA designed to help eligible families with the cost of raising kids under 18.
The income-based benefit pays a maximum of $6,400 per year for each eligible child under six years old and $5,400 for each dependent child between six and 17.
If you didn’t do it at birth or your province doesn’t support automated application, you can still sign up online though your Service Canada account or by filling our and submitting the application form.
Kenn Oliver is the business reporter at The Telegram in St. John’s, NL.
He can be reached via email at firstname.lastname@example.org or on Twitter @kennoliver79