In July 2015, parents were thrilled as Universal Child Care benefits were increased, and backdated cheques from January were issued. Harper’s new initiative meant that parents receiving $100/month for every child aged 0-6 years old were now receiving $160/month, and for children 7-17 years old, they were receiving $60/month (previously no benefit was granted for this age group).
What some taxpayers failed to notice among the hype of the additional money was that the government had eliminated the amount for children credit which was a refund of $338 to parents for each child under the age of 18. In addition to that, all of the UCCB benefits are taxable and must be reported on the lower income spouse’s tax return. Take for example, a family of four with two children ages 8 and 10. One parent would report an additional income of $1440 on their tax return.
For an individual making $50,000/year, this is an additional tax burden of $310. In addition to that, they lose the $338 tax credit for each child, which in this scenario totals $676. Overall, this family would receive $1440 in monthly cheques, but would lose $986 to taxes and eliminated credits,leaving them with only $454. This change is going to be very noticable to parents on their 2015 tax returns. With the elimination of the $338 credit and the taxation of the UBBC benefits, parents with two children can expect to lose approximately $1,000 from their refunds (this amount will fluctuate based on income levels.)
If you have questions about your specific situation, please feel free to contact us to discuss.
This tax tip is a publication of DSK on developments in the area of taxation. The material is general in nature, is current as of published date, and should not be relied upon to replace the requirement for specific professional guidance. These posts should not be considered advice to be acted upon without further professional consultation, as each reader’s personal financial situation is unique.