New Baby Tax Credits in Canada | Income Tax Deductions

A CGA explains the tax credits available to new parents in Canada, as stipulated by the Income Tax Act. You will find explanations of deductions and links to appropriate forms on the CRA Web Site.

You have or are you expecting a new baby? If yes, you are undoubtedly extremely busy. Your life is a whirlwind of planning, shopping, diapers, baby showers, feeding schedules and much more. Thinking about Canada personal tax credits and preparing your income tax return is probably very low on your list of things to spend your time on. Nevertheless, tax time comes every year, ready or not.

This lens offers some information about tax credits and deductions that you can claim for children. You want to be sure you claim everything you can, because raising a child is a costly business in Canada.

Consider this: economists with Manitoba's Department of Agriculture reported that the average Canadian parent will spend $193,000 per child from birth to adulthood. That's a lot of cash. And worse -- this figure accounts for only the basics. The other expenses -- such as donations to school fund raising events, piano lessons, hockey practice, birthday parties and tickets to see Dora the Explorer are all extra!

Thankfully, the Canada Income Tax Act offers a number of tax credits to make the financial situation a little easier.

This lens is prepared in association with Linh Tsiu, CGA.

Specializing in Family Tax Benefits

Linh Tsiu is a Certified General Accountant (CGA) living in Metro Vancouver. For more than fourteen years, Linh has provided accounting services to individuals and to small to medium sized businesses. Her clients are situated across Canada. Thanks to modern technology, face to face meetings are no longer a necessity.

Although Linh offers services to individuals, families and business, she specializes in payroll, taxation and accounting services to families who employ nannies or other caregivers.

Linh says that the greatest rewards of her work come from helping people realize tax savings that they did not know about. "No one should have to spent more on taxes than the law stipulates," she says.

To discuss your taxation or accounting needs, please contact Linh through her web site: Caregiver Tax Services

Tips for Tax Credits

These are the tax credits that the Canada Income Tax Act permits you to claim.

• Basic Child Credit

  Claim $2038 for each child under the age of eighteen. You can claim this amount for the entire year in which the child was born -- so if your baby was born one minute before midnight on December 31, you can claim the entire amount for that year.

• Child Care Expenses

  You may be able to claim child care expenses for children under the age of sixteen.

  Allowable expenses include day care, overnight camps, boarding schools, salary paid to a nanny or caregiver, a fee paid to a nanny agency and more. To be eligible, the expense must have occurred while one or both parents worked at paid employment, attended a school or educational facility or engaged in activities pertaining to self employment.

  The child must have lived with the parent at the time the expenses were incurred. Although there are exceptions, usually this amount can be claimed only by the parent with the lower income.

  The organization or business that provided your child care is obligated to provide you with a tax receipt before the end of February. If an individual provided your child care, you must have that person's social insurance number.

  Please remember that if you do not claim your child care expenses, you cannot carry them over to the next year.

• Child Fitness Tax Credit

  By the terms of the Canada Income Tax Act, you may be able to claim up to $500 per year, per child, for expenses related to child fitness activities. To be eligible, the activity must promote cardio respiratory endurance, plus ONE of the following; muscular strength, muscular endurance, flexibility and balance. If your child has a documented disability, you may claim for activities that that involve movement, including recreational activities (such as horseback riding) that involve exertion.

  Linh provides more extensive information about this credit at this link: Understanding Canada's Child Fitness Tax Credit

• Universal Child Care Benefit (UCCB)

  a. If you have children under the age of six, you receive a monthly, taxable payment of $100 per child through the Universal Child Care Benefit-(UCCB)

  b. Depending on your household income, you may qualify for monthly childcare expenses through the Child Care Tax Benefit (CCTB) program. To register for this benefit, complete form RC66 CCTB application. This form is available on the CRA website at http://www.cra-arc.gc.ca/E/pbg/tf/rc66/README.html

• Child Disability Benefit

  Should your child have a documented disability, you may be able to receive child disability benefits.

• Miscellaneous Benefits

  Various other benefits may apply to you, depending upon your individual situation. For example, you may be able to claim your child's medical expenses. In this case, you will have to provide receipts for medical expenses and prescription medications. Depending on your circumstances, you may be able to claim a tax credit for your child's transit passes.

  If you have a child attending university or college, you may be able to claim the tuition as an expense when you file your tax return.

Many of Canada's Child Tax Credits will depend upon your individual situation.

To be sure you are claiming everything that you possibly can, its always a good idea to consult with a tax professional.

Remember that the Canada Income Tax Act changes regularly. Tax professionals study the law and keep up with the current situation.

It may cost you money NOT to talk to a qualified accountant or tax pro.