Expert Blog

Harper government announces tax changes for families

Posted February 15th 2015

The Harper government recently announced a package of tax changes for families that will include a limited form of income splitting for couples with children, the replacement of the child amount with enhanced UCCB benefits, and increased claims for childcare expenses. The changes to income splitting will be in effect for the 2014 tax season, and the remaining measures will take effect for 2015.

The Family Tax Cut

The family tax cut will allow couples with at least one child under the age of 18 to claim a non-refundable tax credit equal to the amount that would be realized by transferring up to $50,000 of taxable income from the higher-income to the lower-income spouse or common-law partner. The maximum claim will be limited to $2000.

The credit will only be available to couples who are both Canadian residents at the end of the year, and who are not separated due to a breakdown in their relationship at the end of the year and for a period of at least 90 days commencing in the following year. It will, however, be available in the event that one spouse or common-law partners dies during the year.

Their child must be under the age of 18 at the end of the year, and must ordinarily reside with the couple throughout the year. An exception to this rule, according to the Department of Finance, is that this requirement could be met if the parents of a child remarry or enter into new common-law partnerships during the year, or if a child is born, adopted, or passes away during the year.

The credit is unavailable to individuals who were confined to a prison or similar institution for 90 days of more in the similar year, but could be claimed by the individual’s spouse or common-law partner.

Couples are ineligible for the credit if either partner fails to file an income tax return, elects to split pension income, or becomes bankrupt.

Enhancement of UCCB Benefits

Effective for 2015, the Universal Child Care Benefit will be increased from $100 to $160 per month for children under the age of six, and a new benefit of $60 per month will be paid for children over the age of five and under the age of 18. While these enhancements will take effect as of January 2015, they will not be reflected in monthly payments until July 2015. Taxpayers who have already registered for the Canada Child Tax Benefit or related provincial benefits will not have to reapply to receive the enhanced benefit.

Also effective for 2015, the amount for children under 18 at the end of the year will be eliminated, but the family caregiver supplement to the child amount will remain in effect.

According to the Department of Finance materials, the enhancements will take effect as of January 2015 but will not be reflected in monthly payments until July 2015. This means that a retroactive adjustment will be included with July cheques.

Taxpayers who are already registered for the Canada child tax benefit or related provincial benefits will not have to reapply in order to get the enhanced UCCB benefit. However, there will undoubtedly be taxpayers whose income is too high to get the Canada child tax benefit who have not bothered to apply. In order to get their $60 per month they will have to complete Form RC66 Canada Child Benefits Application.

The existing tax treatment of UCCB benefits will apply to the enhanced benefits. In the case of couples, they will therefore remain taxable in the hands of the lower-income spouse. In the case of single parents, they will have the option of including the payments in their own income or in the income of a dependant for whom they are claiming the amount for an eligible dependant.

Elimination of the Child Amount

Effective for 2015 the amount for children under 18 at the end of the year will be eliminated. However, the family caregiver supplement to the child amount will remain in effect.

The elimination of the child amount will not completely negate the savings realized from the enhanced UCCB benefits. However, it will substantially reduce them when the UCCB benefits are included in income at a higher marginal rate. For example, the annual tax savings afforded by the child amount in 2014 is $338. The value of the enhanced UCCB benefit if included in income at a marginal federal/provincial tax rate of 36 per cent would be $461 (calculated as [$60 x 12] x 64%). This would be the marginal tax rate of an Alberta resident in 2014 with taxable income between $87,907 and $136,270.

On a more positive note, lower-income parents who were previously unable to fully utilize the child amount because they were not taxable could benefit from the full enhancement of $720 per year.

Deduction for Child Care Expenses Increased

Effective for 2015, the maximum dollar limits in the calculation of the deduction for child care expenses will all be increased by $1,000 as follows:

  • From $7,000 to $8,000 for children under 7;
  • From $4,000 to $5,000 for children aged 7 to 16 and infirm children over 16;
  • From $10,000 to $11,000 for disabled children.

The weekly limits where a child is staying in a boarding school or camp will be increased proportionately from $175 to $200, $100 to $125 and $250 to $275.

The new package of changes is focused on providing two parent families a tax break and they should see the savings when they file their 2014 tax return.

 

At H&R Block, we believe our clients are entitled to the highest level of service. Our tax advisors are some of the best in the business, and are here to help you with any tax situation you might have. It’s our guarantee.

 

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13 Comments
  • Will this at all affect the amount we receive on the 20th of the month? Other than the UCCB going from $100.00 to $160.00?

    Comment by Tiffany — November 1, 2014 @ 4:10 pm
  • No, this announcement only increases your UCCB amount. It does not affect other monthly credits. You will receive a retroactive UCCB payment in July 2015 for the first six months of the year and then $160 monthly for the rest of 2015.

    Comment by H&R Block — November 3, 2014 @ 8:26 am
  • I am very concerned. Will I loose my child tax benefit payment next year? I am a single mother with a teenage son. Currently I receive approx 350$ month for child tax benefit. I need that to survive but it sounds like the gov is taking that away. So how does this help low income families?? Help!

    Comment by Leigh — November 1, 2014 @ 8:24 pm
  • None of the new changes will affect your monthly Canada Child Tax Benefit. You will still receive that every month. If your son is under 18, you should start receiving the new child benefit monthly in July 2015. There will be a lump sum retroactive payment and then you should begin receiving $60 per month until the year your son turns 18.

    Comment by H&R Block — November 3, 2014 @ 8:30 am
  • Can I claim spousal amount

    Comment by Percylla — November 2, 2014 @ 12:09 am
  • Hello, I will need more information to determine the answer to this question. If you submit a question here taxtalk.hrblock.ca/ask-us-a-question/ with more details I can help you out.

    Comment by Jessica Barkwell — January 27, 2015 @ 9:33 am
  • Can I still claim spousal amount after transfer

    Comment by Percylla — November 2, 2014 @ 12:10 am
  • Based on the information we have received to date, you are not actually moving the income to the spouse’s return. You are simply claiming the non-refundable Family Tax Cut amount that you qualify for on your own schedule. This will not change your spouse’s return so you will still claim the spousal amount.

    Comment by H&R Block — November 3, 2014 @ 8:32 am
  • So those child tax benefit cheques that people like me, single parent,receive every month will be cut to 60$ a month??? How is that helping the low income families???

    Comment by Leigh — November 2, 2014 @ 4:36 pm
  • Your monthly Canada Child Tax Benefit will not be affected by these changes. If you are receiving the monthly Universal Child Care Benefit, it will increase in 2015 as long as your child is under 6. If you have children under 18 but older than 6, you will start receiving the new child benefit in July 2015. There will be a retroactive lump sum payment in July 2015 and then you will receive $60 a month until the year your child turns 18.

    Comment by H&R Block — November 3, 2014 @ 8:31 am
  • As a mother in a shared custody agreement, I am wondering if this $160 will be split like the gov splits our CCTB for deposit, or will it go to the parent that claims the child on their taxes that year?

    Comment by Kristal — November 6, 2014 @ 2:18 pm
  • not sure what I’m doing wrong, but i can’t seem to figure out where I’m entering my UCCB amount on the the online tax program.

    Comment by sarah — February 20, 2015 @ 5:15 pm
  • Hello, if you call 1-800HRBLOCK or email customer.support@hrblock.ca they can assist you. Thanks!

    Comment by Jessica Barkwell — February 21, 2015 @ 2:03 pm

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