Raising a Family? Take Every Available Tax Break

Raising a Family? Take Every Available Tax Break

There’s no doubt that raising a child is expensive. Although there is obviously no fixed price tag, some studies show that the cost of raising a child to the age of 18 is approximately more than $200,000, or nearly 13,000 for each child each year, or about $1,100 a month. And that is before you send them off to university.


A Little Comic Relief

James Weber, a Calgary inventor, received notice from Canada Revenue Agency that he owed $110,000 in income tax.

Being inventive by nature, the man noticed that the bill showed a dollar sign with only one line through it — the symbol denoting the Colombian peso. So he thought he’d just pay those taxes in pesos, which amounted to the equivalent of about $75.

The tax agency didn’t buy the argument and seized the man’s motorbike, helmet, jacket and pants.

The taxpayer then filed 50 documents in Federal Court to back up his claim, including banking and other dictionaries, and the British North America Act.

While agreeing that Mr. Weber’s “type-face analysis of our currency shows a certain inventiveness” the court did not accept the argument. It noted that one of the dictionaries the taxpayer submitted as evidence showed the Canadian dollar sign also to be a one-bar dollar sign.(Weber v. Canada (Minister of National Revenue) Docket: ITA-6261-99)

Compounding the expenses are taxes. According to the Fraser Institute Canadian Consumer Tax Index, which has measured the tax bills of Canadian families since 1976, all taxes paid on the federal, provincial and municipal levels account for more of a family’s budget than shelter, food and clothing combined.

That makes it even more important to claim every tax break you can. Here’s a rundown of the tax relief Canada Revenue Agency (CRA) offers:

Childcare expenses: If you, your spouse, or common-law partner, pay for childcare so you can earn employment income, carry on a business, attend an eligible program at a designated educational institution for at least three consecutive weeks, or carry on research or similar work for which a grant has been received.

Some examples of eligible child care expenses include;

  • Day-care centres and day nursery schools;
  • Child care services provided by some individuals;
  • Day camps and day sports schools;
  • Educational institutions such as private schools (the portion of tuition costs relating to child care services), and
  • Boarding schools, and overnight sports schools and camps.

Generally, expenses have to be deducted from the lower-income earner, although there are exceptions.

Amount for Eligible Dependant:
 Most taxpayers are familiar with the spousal credit, but there is a similar credit for single, separated and divorced people who support a child, elderly parent or grandparent. Two or more supporting relatives cannot split this tax credit. Children must be under 18 at some time during the tax year, unless they are mentally or physically impaired.

Age Amount: This tax credit is available if you are aged 65 or older at the end of the taxation year. The credit is calculated using the lowest tax rate and each province calculates the credit in the same manner except Quebec. In that province you use family income in the calculation and combine the credits for you and your spouse or common-law partner.

Pension Income Amount:
 You can claim the lesser of $2,000 and the actual pension amount received. Don’t forget that this amount is available to both spouses if you are splitting pension income. You do not have to be older than 65 years of age to claim this amount.

Disability Amount: You can claim a tax credit if you are disabled and have a certificate signed by your doctor or medical practitioner stating that the disability is severe and prolonged and markedly restricts your daily living activities. Individuals younger than 18 years of age may claim a supplemental credit. 

Caregiver Credit: You may claim this credit if you provide in-home care for a related individual who is older than 17, is dependant because of mental or physical infirmity, or is your parent or grandparent AND over the age of 65. The infirm person doesn’t have to qualify for the disability tax credit. However, this credit isn’t available if you have taken the amount for eligible dependant for that person.

Adoption Expenses Credit: You may claim certain eligible expenses for each child you adopt in the year the adoption is finalized.

Public Transit Pass Credit: You may claim amounts spent on public transit passes for yourself, your spouse and any children under the age of 19 at year end.

Child Fitness and Arts Credit: You may claim a tax credit on each child on the fees you pay to register the child in a prescribed program of eligible activities. At the beginning of the year in which the expenses are paid the child must be under 16 years of age (or under 18 if eligible for the disability credit). Both credits will be eliminated for taxation years after 2016. 

Canada Employment Amount: If you are employed, you can the lesser of a credit indexed for inflation each year and the total employment income on your tax return.

Interest on Student Loans: You may claim interest paid on student loans in the year or the preceding five years for post secondary education. The loans must have been received under the Canada Student Loans Act, the Canada Student Financial Assistance Act, or a similar provincial of territorial government law.

Tuition and Education: If you do not need all your tuition and education tax breaks for the year, you can transfer all or part of the amount to your spouse or common-law partner, parents and grandparents, including those of the your spouse or partner.

Medical: You might be able to claim expenses for a dependent. The list of deductibles is long, so make sure you understand what you can and cannot claim. If medical treatment is not available locally, you might be able to claim the cost of travelling to get the treatment somewhere else. You don’t have to file your claims on a calendar-year basis. You can sort out your receipts on a month-by-month basis and choose the period that results in the highest yield.

Consult with your accountant to help ensure you take all the credits available to you and the proper amounts.

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