Raising a family is expensive. Households with children spend approximately 20 per cent more on food, clothing, shelter, and entertainment when compared to households without children.
Parents can ease the financial burden by accessing helpful tax credits.
Most helpful is the Child Tax Credit, which is $2,101 per child under 18 years of age. This equates to approximately $315 in federal tax savings per child. If the credit can’t be used by one parent to lower payable taxes, the amount can be transferred to a spouse or common-law partner.
Regardless of household income, the Universal Child Care Benefit (UCCB) is also available to families with children under the age of six. The benefit works out to $100 per month and it is taxed on the return of the parent with the lower income. If you’re a single parent, you can claim this benefit in the income of the child for whom you are claiming an amount for.
Lower income families have access to the Canada Learning Bond which provides $500 at birth for children whose families are entitled to the National Child Benefit Supplement. As long as the family qualifies, they will receive an additional $100 bond each year until the child is 15 years old.
The Registered Education Savings Plan (RESP) provides an opportunity for parents to save for their child’s education. Parents, grandparents or friends can contribute up to $50,000 over the lifetime of the RESP through one lump sum payment or regular monthly or bi-weekly contributions (hint-hint – use the $100/month UCCB). Contributions benefit from tax deferred growth.
Through the Canadian Education Savings Grant program, the RESP receives a 20 per cent ‘top-up’ of the contribution (up to $500 annually and $7,200 throughout the life of the plan) – free money! Parents don’t receive a tax deduction when they contribute to this plan.
Child care expenses from daycare to nannies can also be claimed by the lower income spouse on their tax return. Any unused amount cannot be claimed by the higher income earner unless there were special legal, medical, educational, or marital circumstances.
Keep your receipts for all relevant tax credits and benefits. Visit the Service Canada website for more information .