Tax Breaks for Families in 2015

The new measures consists of three components which are forms of income-splitting, raise in monthly child bonus payments and an increase of the tax deduction parents can claim for their child care and children’s fitness expenses.

The details of the measures are provided as follows:

1. Family Tax Cut – Income Splitting

The new Family Tax Cut in 2015 allows couples with children under 18 to reduce their taxes owing by splitting income for tax purposes. The higher-income spouse will be allowed to transfer up to $50,000 of taxable income to his/her spouse in a lower tax bracket. This is a federal non-refundable credit of up to $2,000.

It will greatly benefit couples with only one spouse working or where the difference in income between the spouses is significant.

2. Increase in Universal Child Care Benefit (UCCB)

Who qualifies for the UCCB?

The UCCB was introduced in 2006 to help Canadian families in supporting their child care through financial support. To be a recipient, you must be a resident of Canada and live with the child and be the person who is primarily responsible for the upbringing of the child. Up until 2014, only children under the age of six were eligible, however starting January 1st, 2015, children under 18 will qualify for the UCCB.

UCCB – Changes in 2015

As of January 1st 2015, the increased amount for the Universal Child Care Benefit are as follows:

As a result, parents with children under the age of six will receive up to $720 more in benefits compared to 2014, and the UCCB will be extended to children between the ages of six to 17.

Qualifying recipients for the UCCB will receive up to six month of benefits in their July 2015 enhanced payment.

3. Increase in the limit for deducting Child Care Expenses

What are Child Care Expenses?

Child Care Expenses are amounts paid by you or your spouse to have someone take care of your child so that you or your spouse are able to earn income from employment, carry on a business, attend school or carry on research for which you or your spouse received a grant.

To qualify for deducting this expense, the child must have lived with you or your spouse at the time when the expenses were incurred.

Child Care Expense – Changes in 2015

The Child Care Expense Deduction dollar limits has increased by $1,000 for the 2015 tax year. The details are summarized as follows:

4. Doubling the Children’s Fitness Tax Credit (CFTC)

What is Children’s Fitness Tax Credit?

Children’s Fitness Tax Credit allows registration or membership fees of physical activity programs for your child (under 16) to be claimed as a tax credit.

If the amount qualifies for both, Child Care Expense and Children’s Fitness Tax Credit, you must claim the amount as Child Care Expenses. Any unused amounts can be claimed as Children’s Fitness Tax Credit.

Children’s Fitness Tax Credit – Changes in 2015

The Children’s Fitness Tax Credit limit will be doubled to $1,000 for the 2015 tax year. In addition, the credits will be made refundable.

Overall Effect

It is important to take the new measures into account when filing your 2014 tax return. Low and middle income families with children will benefit from at least two-thirds of the overall new measures. According to the Government, the average tax break for families in 2015 is $1,140 and it is expected to benefit about four million families with children.

ABOUT THE AUTHOR

ALLAN MADAN

CPA, CA

Allan Madan is a CPA, CA and the founder of Madan Chartered Accountant Professional Corporation. Allan provides valuable tax planning, accounting and income tax preparation services in the Greater Toronto Area.

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