The Tax Blog for Smart Canadians

Canada Child Benefit

The Canada Child Benefit is a monthly benefit paid to parents who have children in their care that are less than 18 years.

The amount of the credit paid depends on your combined family net income (individual income for single parents). The benefit for every child can go up to a maximum of (benefit year July 2024- June 2025):

• under 6 years of age: $7,787 per year ($648.92 per month)
• aged 6 to 17 years of age: $6,570 per year ($547.50 per month)

The benefit gets reduced for every dollar you gain beyond $36,502 and up to $79,087 and depending on the number of children in your care. The reduction goes from 13% for every dollar gained beyond $36,502 for one child to 23% for every dollar gained beyond $36,502 for four or more children. There’s a further reduction for income gained beyond $79,087.

Since the benefit is based on your combined family net income (see above), deductions you can claim on your tax return, such as RRSP contributions and home office expenses (employment expenses), will increase the benefit you can receive.

The benefit is paid out monthly, and you must file a tax return to receive it.

Child care expense deduction

You can claim child care expenses you paid for your child(ren) (under 16 years of age), regarding child care services that allow you to work or go to school, as a deduction against your net income.

You can claim the payments to the following:

• caregivers providing child care services;
• day nursery schools and daycare centres;
• educational institutions, for the part of the fees that relate to child care services;
• day camps and day sports schools where the primary goal of the camp is to care for children (an institution offering a sports study program is not a sports school);
• boarding schools, overnight sports schools, or camps where lodging is involved.

The amount you can claim as a deduction is the lesser of:

• Child care expenses;
• basic limit per child ($8,000 for every child less than 6 and $5,000 for every child 6 and above);
• 2/3 of earned income (employment, self-employment, taxable scholarships).

In the case of a couple, only the lower net income spouse can claim the deduction. However, if the lower-income spouse is in full-time/part-time studies, hospitalized, disabled, etc., then the higher income spouse can claim a portion of the child care expenses deduction for the weeks/months these situations mentioned apply.

RESP

A Registered Education Savings Plan (RESP) is a tax-sheltered account that allows you to save money for your children’s post-secondary education. While contributions to an RESP are not tax deductible, the gains earned within the account are tax-sheltered (just like an RRSP and a TFSA). Moreover, the federal government will add a contribution for every dollar you put into the plan.

When your child enrolls in a post-secondary education program, they can start pulling out of the plan to pay for their tuition fees.

The benefits of an RESP are:

• the gains within the plan are tax sheltered;
• the government gives you additional grants for every dollar contributed;
• the withdrawals of the capital contributed are tax-free;
• the withdrawals of the gains and grants are taxable in the hands of the child, who pays minimal tax.

We previously wrote a detailed blog article on this topic.

Transfers between spouses

Certain credits can be transferred between spouses, and others can be claimed on behalf of your spouse.

Credits that can be transferred between spouses are:

• Age amount - Tax credit if you/your spouse are 65 years old and above and have income of less than $98,309 (2023);
• Pension income amount - Credit of up to $2,000 if you/your spouse received eligible pension income;
• Disability Tax Credit - Credit when you have recognized disability (see “Disabled child or spouse” section below);
• Tuition amount - Credit for tuition fees paid to a college/university;
• Canada caregiver amount for infirm children under 18 years of age - Additional credit for infirm dependants.

For example, if your spouse has an excess amount of any of the credits above (credit higher than their tax payable), they can transfer the excess amount to you. This is done on Schedule 2 of the federal tax return.

For other credits, such as medical expenses and donations, you can claim the amounts paid by your spouse in your own tax return if it’s more beneficial.

Eligible dependant amount

If you are a single parent family with a child who is less than 18 years old, you can claim the eligible dependant credit.

The credit amount is $15,000 less the net income of your child (for 2023) multiplied by 15% (non-refundable tax credit rate).

Spousal amount

If you have a spouse with low income, you can claim the spousal amount. The credit amount is $15,000 less the net income of your spouse (for 2023) multiplied by 15% (non-refundable tax credit rate).

Tuition transfer from students

If your child attends a post-secondary school (college/university, trade/professional school), the fees paid to the school can be claimed under the tuition tax credit.

Any excess credit your child does not need to reduce their tax to zero can be transferred to you and claimed on your own tax return. However, there are limitations to this transfer:

• The total amount of tuition expenses that can be transferred is capped at $5,000;
• Only current year tuition fees can be transferred.

Only the excess amount of credit can be transferred; the child has to use the necessary amount to reduce their tax to zero.

Disabled child or spouse

If you have a child and/or a spouse with a recognized disability, you can claim several credits and benefits:

• Disability Tax Credit (DTC) transferred from a dependant - You can claim the excess credit not needed by your child on your tax return. (For spouse, see “Transfers between spouses” above.)
• Canada caregiver amount - An additional credit amount of around $2,500 (at 15%) added to existing credits such as the spousal amount and eligible dependant credits (see above). For children over 18, a maximum claim of around $8,000 (at 15%) can be claimed (credit reduced by income of the child).
• Child disability benefit - A supplemental benefit added to the Canada Child Benefit (see above) that can reach up to $3,322 for the benefit year, or $276.83/month (progressively reduced by family income).
• Home accessibility expenses - You can claim renovation expenses allowing your disabled child or spouse to gain access, be more mobile and reduce the risk of harm within your home. You can claim up to $20,000 of renovation expenses.

In order to have a recognized disability, a medical practitioner must complete the Disability Tax Credit Certificate form, T2201. You must then send the form to the CRA and get the disability recognized.

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