Your family can cut your tax bill

Zoomer | January 1st, 2003

Raising a family is an expensive proposition, as every parent knows. From the moment they’re born, children cost money. Younger people may think it ends when they leave home and go out on their own, but it doesn’t. Before long, grandchildren appear on the scene and the cash outlay continues.

Of course, no one can put a price tag on our children and grandchildren. They’re precious and priceless. But if you can recover a little bit of the money you spend on them, so much the better.

Unlike most jurisdictions, the federal government does not allow any deductions or tax credits for dependant children, except in a few specific cases, one of which I’ll explain below. But there are other ways that you can claim some tax relief for your children, as well as for your spouse and perhaps even other close relatives. Here are some examples.

Spousal tax credit. If you supported a spouse or partner who had income of less than $650 in 2002, you can claim this credit on your return at line 303. The amount allowed is $6,482 (reduced if your spouse’s income is between $650 and $7,131). Your federal tax reduction will be 16% of the amount claimed. You’ll reive a provincial tax credit as well. Note that as a result of recent changes in the tax laws, same-sex couples are also eligible for this credit.

Canada Child Tax Benefit (CCTB)

. These tax-free monthly payments are available to families with children, but some parents don’t claim them because there is a widespread impression that they are only for lower-income people. That’s not the case; many middle-income families are eligible to receive payments that could amount to $100 a month or more, depending on the number and age of their youngsters. If your children have families of their own, ask if they have checked out this benefit. To obtain the CCTB, you must do two things.

1) Both parents must file a tax return every year, even if one has no income at all.

2) A formal application must be submitted. You can get all the details and download an application form at the Canada Customs and Revenue website. Go to: http://www.ccra-adrc.gc.ca/benefits/childbenefit-e.html

Don’t wait to apply. Retroactive CCTB benefits are only available for 11 months. Also, several provinces offer their own child benefit programs, which supplement the CCTB. Check with your provincial government for details.

Single parent tax credit

. If you do not have a live-in spouse or partner and are raising a child on your own, you are probably eligible to claim this tax credit. The technical name for it is “Amount for an eligible dependant” and it shows up at line 305 of the tax return. Although this credit is mainly used by single parents, it can be applied to some other close relative, such as a parent or grandparent, if you are supporting the relative at home and you have no spouse or partner. If the dependant had income of less than $650, you are allowed to claim an amount of $6,482 on your 2002 federal tax return.

Medical expenses

. Unfortunately, kids seem to get sick a lot. If there’s anything going around at school, they come home with it. That can run up medical bills for prescriptions. You may also have shelled out for dental care, glasses, and a host of other medical-related costs that aren’t covered by your provincial health care program or any employer or private health insurance you have. If these expenses exceeded 3% of net income, you can claim a tax credit for the difference at line 330. The lower-income spouse should always make this claim, since the 3% threshold will be less. You can use any 12-month period that ended in 2002.

Tuition and education credits

. If you have a child attending a post-secondary institution, he or she can claim a tax credit for tuition costs and related expenses. As well, the student qualifies for an education credit of $400 a month for each month he or she is in full-time attendance at the school. Students must file a tax return and use the available credits to reduce their own tax payable to zero. Anything left can either be carried forward to a future year or transferred to a supporting person, usually mom or dad. See lines 323 and 324 of the federal tax return for details.

GST credit

. The GST credit is available to all families. There is an income test involved, but if your family net income is under $40,800 and you have two children, you’ll receive something. Each qualifying adult is eligible to receive up to $213 a year, while children under 19 get $112. The payments are made quarterly and are adjusted every July to account for inflation.

This one is often overlooked by older children. Everyone age 19 and up is eligible to claim the credit, if they meet the income test. However, students sometimes fail to enter a claim because they have little or no income and therefore don’t bother to file a tax return. You’ll find more details at www.ccra-adrc.gc.ca/benefits/gst_hst-e.html

There are several other ways to use your family to obtain tax breaks, so don’t assume this is an all-inclusive list. Review your Tax Guide carefully. You may find some happy surprises.