Family tax benefits in 2015

At the end of tax season, many Canadians resolve to do better next year. So while you may be concentrating on your 2014 return, here’s what you should know about 2015’s taxes so you can prep your filing system now (you do have a filing system, right?).

Children’s fitness amount and adoption expenses

If you have children who play sports, you’re probably familiar with the Children’s Fitness Tax Credit, which increased to $1,000 per child under age 16 for the 2014 tax year (line 364, “Children’s fitness amount,” Schedule 1).

It’s a non-refundable tax credit. But for 2015 and subsequent tax years, the government’s proposed making the children’s fitness amount a refundable tax credit (new lines 458 and 459 on page 4 of your 2015 tax return; line 365 will be omitted from Schedule 1).

Peter Weissman, partner at Cadesky Tax in Toronto, explains that tax credits, including the children’s fitness amount, are determined by multiplying the amount ($1,000) by the credit rate, which is 15% federally. So that $1,000 credit works out to $150.

Doug Carroll, vice president of tax and estate planning at Invesco Canada in Toronto, says the change to a refundable credit won’t make a lot of difference for families. “In order for the refundable aspect to come into play, somebody would actually have to have zero tax due.” Bottom line: Your family will likely continue to apply the $150 credit toward tax owing.

Also for 2015 is an increase to adoption expenses (line 313): the maximum claim is $15,255 per child for adoptions. Eligible expenses include fees paid to licensed Canadian agencies or mandatory fees paid to foreign institutions. You must reduce your claim by the amounts of any other forms of assistance you received, and parents can split the amount. Expenses can be claimed in the tax year that includes the end of the adoption period (when the adoption order is issued or the child starts living permanently with you, whichever is later).

Universal Child Care Benefit

Once approved by Parliament, an enhanced Universal Child Care Benefit (UCCB) will start retroactively to January 1, 2015, and will replace the Child Tax Credit (line 367). The Child Tax Credit is a non-refundable tax credit totalling around $564 (again, after factoring federal and provincial rates), based on $2,255 for each of your or your spouse’s or common-law partner’s children who are under 18 at the end of the year. (Note the tax-free Canada Child Tax Benefit, CCTB, is not affected by the enhancement to the UCCB.)

The enhanced UCCB will be $160 monthly per child under 6 (up from $100 monthly). And new is another $60 available monthly for each child aged 6 to 17. Payments will be made in July 2015 to cover the first six months of the year. The increase will be applied automatically for current UCCB recipients; new applicants can visit CRA’s website and use the My Account service, or complete and send by post Form RC66, Canada Child Benefits Application.

How does this increase compare to the amount for children, which families now lose?

In 2014, the amount for the child tax credit works out to a federal credit of $564 ($2,255 × 25%). The enhanced UCCB is a monthly payment totalling $1,920 for children under 6, and $720 for children 6 to 17.

“The enhancements to the UCCB are better than what you lose from the ‘amount for children’ credit. It’s better for some families than getting a tax credit,” says Weissman. He warns, however, that the UCCB is also taxable.

Carroll concurs. “Even if you’re at a 50% tax bracket, $720 becomes $360,” which is greater than the amount for children ($338.25).

CRA pays the benefit to the mother; however, when applying for the benefit, the mother can sign a note designating the father as the primary caregiver. Same-sex parents designate which spouse receives the benefit.

The benefit is taxable income and must be claimed by the lower net-income parent (line 117 of your return); a single parent can have the UCCB taxed in a child’s hands (claimed on line 185, which is located to the left of and below line 117 of your return).

If you’re divorced and share custody equally with your former spouse, CRA may consider each of you a primary caregiver and split the benefit equally between you. Weissman notes that divorced parents who share an address (for example, one ex-spouse lives in a basement apartment, and the other lives on the main floor) may be required to prove their status to CRA.

Federal benefit	Changes for 2015
Children’s fitness amount, lines 458 and 459 on your 2015 return	Now a refundable tax credit
Adoption expenses, line 313	Increased to $15,255 per child
UCCB	Increased to $160 monthly for children under 6; new is $60 monthly for children 6–17

Tax credit: a reduction in tax owing. The taxpayer must have taxable income to use the credit. The size of the resulting credit does not depend on your tax bracket (it is calculated based on the lowest bracket). Most credits are non-refundable, meaning they cannot reduce your income below zero.

Tax deduction: reduces the amount of your income subject to tax. The size of the resulting tax savings depends on your tax bracket.