It’s Taxing

Tax Considerations for Parents
It’s Taxing

This season is filled with joy—but it’s also filled with things to do. One of those is the not so joyous task of taking a look at your family tax situation to ensure everything is in good order by the end of the year. And as if you don’t have enough to think about as a parent, now you have more to think about at tax time (congratulations). Just for you, we consulted with Deborah Shure of to remind us of all those taxing tax considerations. The good news is that many of them save us money, and that’s worthwhile in these economic times.

New Benefits
The Canada Child Tax Benefit (CCTB) helps eligible families with the cost of raising children under the age of 18 (read: the government gives you money). Your eligibility for the CCTB is largely based on your family income (lower income earners receive it). The Universal Child Care Benefit (UCCB) is designed to assist all families with their childcare expenses for children under the age of 6. 
To Do? CCTB and UCCB do not come to you automatically—so if you had a baby in 2008, make sure you apply for them (one application works for both). Also, both spouses need to file an income tax return before the CCTB can be calculated. So, even if one had no income, a return should still be filed every year in order to determine the correct entitlement.

Get (Fiscally) Fit
Parents can claim up to $500 per year per child for children under the age of 16 (or under 18 if the child is eligible for the disability tax credit) through the Fitness Tax Credit, as an incentive to keep children active and in sports. If you have paid an amount that would qualify to be claimed as childcare expenses as well as the children’s fitness amount, then you must first claim this amount as a childcare expense. If there is an amount remaining, it can then be claimed for the children’s fitness amount as long as the requirements are met.
To Do? Make sure that you have receipts from any institutions that provided the fitness activity or instruction. Ask for a receipt if you do not have one. It is possible that only a portion of the expense qualifies for the credit, so be sure to find this out from the provider.

A Higher Education
Registered Education Savings Plans (RESPs) are a great way to save for your children’s post-secondary education, as contributions are held in a tax-free trust and grow tax-free until the child begins to draw from the plan. Also, contributions are supplemented by an additional 20% through the Canada Educational Savings Grant (CESG) so don’t miss out on your share.
To Do? Remember that the deadline for RESP contributions is December 31, not the end of February as is the case for RRSPs, so make your contribution today, to ensure you get that CESG top-up (read: free money from the government).

Care for the Childcare
The maximum childcare deduction per child under the age of 7 is $7,000. For children turning 7 to those under the age of 16, the limit is $4,000 per child. For kids with a disability, the limit is up to $10,000. The expense must be deducted from the lower of the partnered parent’s income. Childcare expenses can come in the form of daycare, through the services of a nanny, or even from a portion of nursery school fees.
To Do? Your daycare or nursery school must issue a receipt for payments made during the calendar year (don’t expect the receipt to be very official looking—they usually come in the form of a letter) so make sure you get yours. If you employ a nanny, you have a few more to-do’s:

  • Check the current balance in your payroll deductions account with the Canada Revenue Agency. Make sure that it is the amount that you expect by reviewing your past Statements of Account. If there is a difference, be confident that you can document why and when this difference came about.
  • All caregivers that you paid during 2008 should be issued a T4, and the amounts from all T4s (including the necessary taxable benefit of room and board if your nanny is live-in) need to be summarized on the T4 summary, both of which are due by the last day in February. (If you are late, there is a minimum $100 penalty, plus a possible additional $25 per day to a maximum of $2,500.) So, if you had a change in nannies, be sure not to leave one out (you’ll need the Social Insurance Number and current address of every employee to complete the form so start tracking them down now).
  • Taxes, including EI and CPP rates, change as of January 1 so make sure that you adjust the remittance you make to the CRA with the new rates.

So keep track of all your receipts, file on time and make sure you are receiving the benefits to which you are entitled. No loopholes required.

Shure Consulting Services specializes in assisting caregiver employers with their “nanny tax frustration relief”. You can visit, or call 1-877-626-6982 for more information.

Tagged under money, taxes, child care
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First published 2008.12.09

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