This Year is Your Last Chance to Take Two Child-Related Tax Credits

The kids are home for the next couple of months.

They’ll be running through sprinklers and getting brain freeze from ice cream cones. Or they’ll be glued to their mobile phones or gaming stations and generally underfoot. What to do, then, to keep them otherwise occupied, healthy, fit and out of trouble? Send them off to fitness activities or arts programs of course!

But that can be expensive. And this year, you can’t claim as much of the costs on your 2016 tax return as you did in previous years. Next year, you’ll get nothing.

Budget 2016 slashed by half the federal refundable children’s fitness tax credit and eliminates it in 2017. The amount has been cut to $500 from $1,000. The nonrefundable children’s arts credit has been cut to $250 from $500. However, both credits are still eligible for the additional $500 tax credit for a child with a disability (that additional amount also disappears in 2017). Here are the details:

Children’s Fitness Amount.

This refundable tax credit lets you claim eligible fees paid for registration or membership for a child in a prescribed program of physical activity, up to a maximum of $1,000 for each child of your own, your spouse or your common-law partner. The child must be under 16 years of age — or younger than 18 if eligible for the disability amount — at the beginning of 2016.

If the child does qualify for the disability amount, an additional $500 can be claimed provided at least $100 is paid in eligible fees in the year.

You calculate the maximum credit of $75 ($150 for a child eligible for the disability tax credit) by multiplying the lowest personal income tax rate (15% in 2016) by the eligible amount for each child.

Supervised and Suitable

Qualifying fitness programs must be supervised and suitable for children and they must last a minimum of eight consecutive weeks or, in the case of children’s camps, five consecutive days, if more than 50% of the daily activities include a significant amount of physical activity. They also must require action that contributes to significant cardiorespiratory endurance and one or more of:

• Muscular strength,
• Muscular endurance,
• Flexibility, and/or
• Balance.

Included among the many programs eligible for the credit are hockey and soccer camps, golf lessons, horseback riding, sailing, and bowling. For children qualifying for the disability amount, the requirement for significant physical activity is met when there is movement that requires an observable use of energy in a recreational context.

The following aren’t eligible:

• Programs where riding in, or on, a motorized vehicle is an essential part of the activity,
• Unsupervised activities,
• Regular school programs (fees charged for extracurricular programs that take place in school are eligible),
• Sports-academics programs, and
• Fees paid for accommodation, travel, food or beverages (room and board at a fitness camp doesn’t qualify).

Keep in mind that costs eligible for the fitness amount can’t be used for the children’s arts credit.

Children’s Arts Credit.

You might send your kids to programs aimed at improving their minds. For this you may receive a nonrefundable tax credit that allows you to claim eligible fees paid in the year up to a maximum of $500 for the cost of registration or membership of a child in a prescribed program of artistic, cultural, recreational or developmental activity. An additional $500 is available if the child is eligible for the disability tax credit and a minimum of $100 has been paid in eligible fees in the year.

The maximum tax credit is calculated in the same way as the fitness credit.

You may claim a credit of as much as $500 for each child for all of their arts-related activities. The general requirements are the same as for the fitness credit in terms of age, program length and increases for children with disabilities.

A Broad Range of Activities

In general, eligible activities:

• Contribute to the development of creative skills or expertise in artistic or cultural activities,
• Provide a substantial focus on wilderness and the natural environment,
• Help children develop and use particular intellectual skills,
• Include structured interaction among children where supervisors teach or help children develop interpersonal skills, or
• Provide enrichment or tutoring in academic subjects.

This covers a broad range of activities ranging from painting, music classes, languages and drama, to Scouts, Girl Guides and academic tutoring.

Eligible expenses include fees paid for the cost of registration or membership, which cover the costs of administration, instruction, and the rental of facilities or equipment. When the equipment or uniforms have little resale value after the program, the amount of the cost related to those items is eligible.

Ineligible expenses include:

• Amounts in addition to fees and registration that are used to purchase uniforms or equipment,
• Fees related to travel, meals and accommodation,
• Fees paid to a program run by a person younger than 18 or by the spouse or common-law partner of the individual claiming the credit, or
• Amounts claimed as a deduction, or as the Children’s Fitness Tax Credit or any other tax credit.

Hang on to Receipts

When you send your kids off to a program that qualifies for a tax credit, be sure you keep your receipts. You don’t submit the receipts with your income tax return, but you should keep them in case Canada Revenue Agency (CRA) asks for verification.

Receipts should include the:

1. Name and address of the organization and the program.

2. Amount received, date received, and amount eligible for the tax credit.

3. Full name of the person paying.

4. Full name and year of birth of the child.

5. Signature of an authorized person (not required for electronically generated receipts).

Talk to Your Advisor

Determining what qualifies for tax deductions or credits may be complex. And keep in mind, the provinces and territories may offer similar tax credits. Consult with your adviser who can help ensure you take all the tax breaks available to you.