As we approach back to school season, it’s yet another reminder to parents of how quickly those child-rearing expenses can add up.
That’s why we’re serving up our own reminder that, thanks to established tax laws in Canada, caregivers can access various child tax credits to help alleviate some of the financial burden. These tax credits are available to help parents manage the costs associated with raising a child by increasing potential tax returns and/or reducing what they owe the government.
Let’s explore some of the options available to you (both federally and provincially) if you’re looking to take the edge off your expenses as a caregiver.
Canada Child Benefit (CCB)
The Canada Child Benefit (CCB) was designed to assist parents with the high costs of raising children that are under 18 years of age.
The amount received from this tax-free monthly payment depends on several factors such as the number of children who live with you, the ages of your children, your adjusted family net income (AFNI), and your child’s eligibility for child disability benefits.
For you to be eligible for the CCB, you and your spouse or common-law partner must file tax returns every year, even if there’s no income to report. The deadline for filing taxes is generally at the end of April each year.
The Child Disability Benefit (CDB)
The Child Disability Benefit (CDB) is a tax-free benefit for families who care for a child under 18 years of age with a severe and prolonged physical or mental impairment. It’s an additional amount that’s included with the Canada Child Benefit (CCB) that we mentioned above.
To be eligible, caregivers are required to complete and submit the Child Disability Benefit Application and have it certified by a medical practitioner.
The total amount given via this benefit is determined by the income of the family and the number of children in a household.
The Canada Caregiver Credit (CCC)
The Canada Caregiver Credit (CCC) is a non-refundable tax credit that assists caregivers with the expenses involved in taking care of dependent relatives with a physical and/or mental impairment.
For a person to be eligible for this credit, the dependant’s net income must be below a certain threshold. This credit can be received regardless of the age of the dependant as long as they require the assistance of a caregiver.
The amount given is calculated based on a set amount that is then adjusted based on the dependant’s net income.
Claiming Child Expenses in Alberta
Alberta, like most provinces, uses the provincial tax system to provide additional credits above and beyond those offered by the federal government. This consists of benefits such as Alberta Family Employment Tax Credit (AFETC) and Alberta Child Benefit (ACB).
The AFETC offers a refundable tax credit to working families who have children under 18, and the amount provided depends on family and spouse income as well as the number of children.
In contrast, the ACB provides a tax-free benefit to families with children under 18. While the amount is also income-dependent it doesn’t rely on employment, making it accessible to non-working families.
How to Write Off Child Expenses
The Child Care Expenses Deduction (CCED) is one of the major ways Canadian parents can write off child expenses on their taxes.
It’s important to note that child expenses only qualify when they are used to allow the parent to earn income from employment or a grant, carry on a business either alone or as an active partner, attend school under certain conditions, or carry on research or similar work, for which a grant was received.
The amount permissible for the deduction depends on your child’s age, as well as any coinciding physical or mental conditions.
Regardless, claiming these child care expenses is the same no matter what: Form T778, Child Care Expenses Deduction, must be completed and submitted by the mandated deadline.
Have Questions? We Can Assist
Claiming child tax credits and writing off child expenses in Canada and Alberta involves adherence to tax laws and guidelines. It is important to understand the various benefits and their qualifying criteria to maximize the benefits you can receive.
While the Canada Revenue Agency’s (CRA) website provides comprehensive information on these credits, our team of Chartered Professional Accountants can offer you more of a personalized understanding of these credits and your eligibility.
Reach out to us today – we would love to help you explore and understand your options!
