You’ve probably heard a lot in the last few weeks about the new Family Tax Cut. Heck, we post a blog on the subject already. So the question you’re no doubt asking is: how does it work exactly, and is there anything else from CRA I should keep an eye for?
Well it’s gearing up for election season, so the Federal Government is busy as usual coming up with new tax savings. Let’s take a look at the highlights of what we’ve discovered so far.
Family Tax Cut
Probably the highest profile announcement of the day, the Family Tax Cut comes to us via Schedule 1A on this year’s tax return. We’ve heard critics object to this tax cut because they say it will only benefit the wealthiest families who hardly need more help making ends meet, but are they right?
While it is primarily targeted towards single-income families, this credit should actually provide savings in most any case where there is a disparity of tax brackets between spouses with children under the age of 18, even if both spouses have income.
Moreover, the concern that the credit disproportionately benefits the wealthy is specifically addressed by capping the credit at $2,000. For example, without such a cap the credit on a single income family of $150,000 would have been over $7,600.
Enhancements to the Universal Child Care Benefit
At the same time, significant changes are coming to the UCCB credit. Not only is it increasing by $60 to a total of $160 per month for children up to age six, but it will also offer a credit of $60 per month for children aged six to 17 years.
While the changes are effective as of January 1, 2015, the difference in payments will not be seen until July of 2015 when the government will pay the owed monies retroactive to the beginning of the year. This results in a $420 payment per child.
In addition, this benefit will replace the existing Child Tax Credit (on line 367 of Schedule 1) starting with the 2015 tax year. So instead of a non-refundable credit that only amounts to about $340 after taxes, you would receive over $700 of money paid directly to you.
Children’s Fitness Tax Credit
The Children’s Fitness Tax Credit has proven to be extremely popular since enacted, and it’s going to get even better. The credit is going to double from the current limit of $500 to $1,000 from 2014 onward, plus it will become a refundable credit as of 2015.
Child Care Expenses
The government also announced that the limit on the child care expenses deduction would be increasing by $1,000 effective for the 2015 tax year. The maximum amounts that can be claimed will increase to $8,000 from $7,000 for children under age seven, to $5,000 from $4,000 for children aged seven through 16, and to $11,000 from $10,000 for children who are eligible for the Disability Tax Credit.
So What Does It All Mean?
All of these measures should provide an average savings to eligible families of more than $1,100 in 2015, and that’s just the beginning. While the savings here only apply to a specific segment of the population, with a federal election looming around the corner next year, more tax savings are sure to be announced in the coming months. As always, we’ll keep you posted on all upcoming developments.