Claiming childcare costs
Such tax relief could result from claiming childcare costs. “This benefit is very important to them as they try to cover the costs of daycare, camp and everything else,” said Sean Grant-Young, national tax director for Baker Tilly Canada. The deduction allows parents to say expenses for daycare, nannies, day camps and other child care services obligatory for each spouses to work or run their businesses, he said. There is not any entitlement to special lessons, resembling: E.g. hockey camps.
Auditor Stefanie Ricchio said the actual caveat to recognizing an activity as child care expense is that a baby is participating in a program so the parent can do their job and earn money. For example, sending your kids to a summer camp program to be watched when you work is an expense you may deduct in your taxes, she said.
For children under seven, the deduction amount will be as much as $8,000 per 12 months. After that, it drops to about $5,000 per 12 months until age 16. In most cases, Ricchio said, the parent with a lower net income must apply for child care.
Government advantages tied to your tax return
The Canada Child Benefit is the “cornerstone” of the best way the federal government supports families with monthly payments which can be also income-based and depending on taxes, Grant-Young said. “It is important to make sure you file tax returns even if there is no income,” he said.
The Canada Revenue Agency says parents who don’t file their taxes on time risk losing CCB payments. Benefits could also be temporarily suspended for late applicants.
In January, the federal government announced an expansion of its existing GST credit program, increasing the rebate by 25% for the subsequent five years. The program applies to low and modest income families to offset the GST/HST they pay.
If parents have separated or a baby is growing up in a blended family, tax refunds and credits can get a little bit more complicated depending on who’s claiming the expenses, and experts say it could be higher to seek the advice of an accountant.
Families mustn’t ignore other tax credits
There are also some smaller tax advantages that oldsters can reap the benefits of.
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Families can claim eligible medical expenses for his or her dependents and receive a 15% non-refundable tax credit. However, medical bills must exceed an income or expense limit. Grant-Young said taxpayers must cover the lesser amount of either greater than $2,800 in medical expenses or spending 3% of their net income on health care.
For example, if someone earns a net income of $40,000, they might need to spend a minimum of $1,200 on medical expenses (prescriptions, dental) before the credit takes effect.
Income Tax Guide for Canadians
Deadlines, tax suggestions and more
Some provinces also offer additional credits for fitness or other extracurricular activities. It’s vital to avoid wasting these receipts for tax season.
For adult children in post-secondary education, families can select whether to make use of the schooling tax credits in the identical 12 months, to roll them over to subsequent years if the kid finds a better-paying job, or to pass them on to the parents. “A lot of parents feel strongly that if I pay for your school, I’m taking advantage of your tuition tax credits,” Ricchio said. She added that the utmost annual amount transferred to a parent, grandparent or eligible guardian is $5,000.
Finally, not everyone realizes that registered education savings plans will not be tax deductible, Ricchio said. “RESPs work differently than RRSPs,” she said, referring to the registered retirement plan. “When you contribute to an RRSP, you get the deduction from your taxable income. But the RESP doesn’t work that way.”
However, RESP contributions offer tax-deferred growth and government subsidies to extend savings without affecting contribution scope.
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