Is It Possible To Raise A Child In Canada On $3000-$4000 Per Year? Use Your Tax Credits.

I had a nice conversation the other day with a representative from the CBC regarding the findings made public  by The Fraser Institute, stating that it has never been easier financially, to raise a child in Canada.

My immediate thoughts were that it was absolutely not possible to do this.  I even tried to convince the reporter that the figures being tossed around of $10,000-$12,000 per year were low.   How could this be possible?  I mean once you take into consideration child care (daycare or a nanny), you’re at the high-end of that estimation.  Taking out of the equation that a major city in Canada – such as Toronto – has certain added costs, I pictured a rural community, handed-down clothing, one-parent working and home-grown veggies in the summer and I still came in over $4000.

Then I learned that this figure did not take into consideration child care.

Okay, so it might be possible…  Might.

A couple of hours after speaking with the CBC, I heard Dr. Sarlow (who prepared this report), explain on AM640 that these figures represented the low-end of the scale.  $3000-$4000 are what parents can expect to spend for the necessary expenses such as food, fitness, clothing, personal care and school supplies.  All of this, of course, takes into consideration that the parents are being as fiscally responsible as possible and buying only what is absolutely necessary.

Even in cases where a parent stays home to look after the child(ren) or if there are parents or grandparents available to do this, there is still an opportunity cost of the lost income from that parent not working and earning income instead.  I do not agree that through the omitting of childcare expenses there is a belief that the majority of Canadian families have zero child-care costs.  In fact, the report states that childcare expenses are “best treated as a special expense for families for whom it applies.”

As a tax professional and a father of 3 young children in one of Canada’s most expensive cities, I can say that it takes more than “income” to be able to “afford” my children.    The Canadian government (CRA)  has made many benefits and credits available to help families with their expenses throughout the year and reduce the amount that they owe at tax time, including;

  • Working income tax benefit (WITB) – Working individuals and families with low-income may be able to claim this refundable tax credit. The WITB includes a supplement for individuals who qualify for the disability amount.
  • Children’s fitness tax credit – Children who played soccer, took ballet classes, or participated in a  program of physical activity in 2012 may be eligible for a tax credit up to $500, per child, of the cost of these activities for a non-refundable tax credit of up to $75 for each child.  An additional $500 for each eligible child who qualifies for the disability amount and for whom parents have paid a minimum of $100 in eligible expenses is also available.
  • Children’s arts tax credit – Parents of children who participated in a program of artistic, cultural, recreational, or developmental activity in 2012 may be able to claim up to $500 of the money spent per child on these activities for a non-refundable tax credit of up to $75 for each child.  An additional $500 for each eligible child who qualifies for the disability amount and for whom parents have paid a minimum of $100 on registration or membership fees for an eligible program.
  • Child care expenses – Did your children attend daycare or a program such as a summer day camp in 2012? You or your spouse or common-law partner may be able to claim what you spent on eligible child care in 2012.
  • Family caregiver amount – If you have a dependant with a physical or mental impairment, you may be able to claim up to an additional $2,000 when you claim certain non-refundable tax credits.
  • Goods and services tax/harmonized sales tax credit – The GST/HST credit is a tax-free quarterly payment that helps individuals and families with low and modest incomes offset all or part of the GST or HST that they pay.
  • Public transit amount – Did you or your eligible dependant use public transit in 2012? You may be able to claim the cost of certain public transit passes or electronic payment cards under this non-refundable tax credit.
  • Child disability benefit – Parents may be eligible for this tax-free benefit if they cared for a child under the age of 18 who is eligible for the disability tax credit.
  • Canada child tax benefit – A tax-free monthly payment that helps eligible families with the cost of raising children under the age of 18.
  • Universal child care benefit – If you have children under the age of six years, you may be eligible for this taxable benefit, which supports child care choices for families.
  • Medical expenses – You may be able to claim a non-refundable tax credit based on the medical expenses paid for you, your spouse or common-law partner, or your children for any 12-month period ending in 2012.
  • Disability amount – If you or a family member has a severe and prolonged impairment in physical or mental functions, you may be able to claim this non-refundable tax credit.
  • Registered disability savings plan (RDSP) – A RDSP is a savings plan to help Canadians with disabilities and their families save for the long-term financial security of a person who is eligible for the disability tax credit.

In addition, in situations where parents or grand parents look after children, the family is missing out on the childcare tax credit where parents can claim payments for childcare expenses made to; caregivers, nursery schools, daycare centres, educational institutions for the part of the fee relating to childcare services, boarding schools, day camps and day sports schools.

These expenses cannot be claimed if the child care is provided by an individual who is the child’s father or mother, another individual, a related person under the age of 18-years-old, or a blood relative, or someone connected through marriage, common law partnership or adoption.

So is it better to spend the least amount of money possible when raising children, or to be aware and take advantage of the benefits and credits available to assist with raising the next generation of public policy analysts?

In today’s hyper-competitive, global economy, parents need to find ways to give their children the edge against their future competition and the best way to do this is to take advantage the credit and benefits available.

If you are now checking you prior-year tax returns to see if you claimed any of these tax credit and you did not, do not worry.  In-TAX_icating Tax Services will review your previously filed tax-returns and correct them for you.

http://www.intaxicating.ca

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Author: Warren Orlans

Welcome to inTAXicating. My name is Warren Orlans and this is my blog. With over 17-years experience in the taxation industry, 11 of them working for the Canada Revenue Agency (CRA), and the rest working in the private sector at large financial institutions responsible for resolving tax issues for corporations and individuals and the Canadian lead for a large US bank on FATCA implementation. My tax career began pretty much out of university at the CRA, in Collections, where I moved up, across, over and up again through their division with stops in Enforcement, Taxpayer Relief (then Fairness), Audit, Directors Liability, Training, Mentoring, GST, GST/HST, Payroll, Corporate Tax, Personal tax, and probably much more. If you have a collections, compliance or audit issue with the CRA, inTAXicating is the place you need to contact. inTAXicating works in strategic partnership with amazing tax lawyers, insolvency practitioners, mortgage brokers, debt counselling experts and much more. When dealing with governments, knowledge is power. We possess strong understanding of government so we know what the next step is before the government does. When you have a collections problem with the CRA, do you hire a graphic artist? No, you get a former collector who trained the staff, and who worked as a resource officer for 5 years. Then you know you are on the right track to resolving your tax problem(s). Others offer suggestions. We offer solutions! info@intaxicating.ca

3 thoughts on “Is It Possible To Raise A Child In Canada On $3000-$4000 Per Year? Use Your Tax Credits.”

  1. The US is aggressively targeting those it defines as ‘US taxable persons’ wherever in the world they live – which includes those Canadian citizens resident and born in Canada who had a US parent – despite having no other US connection of any kind, and no US assets or income. The RESP held even by Canadian citizens and residents is considered a taxable ‘foreign trust’ by the US, and penalized accordingly. The annual reporting on the 3520 and 3520-A is so complex that it is difficult to find a preparer to complete the forms, and the cost is high for that help.

    For over 1 million Canadian citizens and permanent residents with the accident of a US parent or a US birthplace (ex. border babies – of Canadian mothers sent to US border hospitals when their communities couldn’t serve them) – the US taxes their RESPs, TFSAs, and RDSPs (as well as RRSPs without the continual annual treaty election).

    The extraterritorial US double tax grab makes it more expensive to raise children in Canada – for over 1 million families – many of whom merely inherited their US taxable status via parentage.

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    1. The US also taxes Canadian maternity leave income earned by Canadian taxpayers resident in Canada with NO US connection other than inherited US parentage or an accidental US birthplace.

      http://isaacbrocksociety.ca/2011/12/14/about-the-isaac-brock-society/

      And now the US is seeking to impose FATCA on the entire globe – including Canada, at great cost to ALL Canadian taxpayers, and account holders – and to compel ALL Canadian financial institutions, including banks, credit unions, insurance companies, private pension plans, etc. to identify each and every one of their account holders as ‘US taxable persons’. This includes snowbirds and ex-greencard holders, those with a US parent, US birthplace, etc. And this includes Canadian citizen and Canadian resident taxpayers with NO US connection or relationship and no US income or economic tie.

      Some in Canada are also now subject to the Obamacare funding tax – though we have no use for US healthcare and would not qualify for it anyway.

      If we have a US parent, or a US birthplace or an expired greencard, though we are Canadian citizens and taxpayers and residents – we cannot invest in Canadian mutual funds – since the US imposes extraterritorial taxes at a punitive rate on them – at the behest of US banks who were afraid that US residents would invest in them and divert investment income out of the US.

      Though we are Canadian citizens and residents, the US even aggressively asserts the right to apply a US capital gains tax on the sale of our Canadian principal residence – which is not taxable by the CRA in Canada.

      The Canada/US tax treaty does NOT exempt us from US taxation of Canadian sited assets, accounts and income – even though we have NO US relationship or income.

      The US treaties all include the ‘savings clause’ and ‘last in time’ rule that assert its right to tax those it defines as taxpayers whereever in the world they live, are birth or naturalize citizens of other countries, are already fully tax complliant outside the US, live outside the US, and have no US income.

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