Parents may be overpaying taxes

It is not easy saving for your children’s education and it seems Canadian parents are making things harder on themselves than they need to be.

According to the RBC Tax Planning Poll conducted by Ipsos Reid, 42% of parents with young children are not benefiting from the tax savings that are available to them. Of the 44% of young families who are not saving for their child’s post-secondary education, 30% feel they don’t have the money to do so and 28% say it is because they are concentrating on paying down their debt.

RBC suggests parents who wish to contribute in some way can do so by following such simple tips as:

• Opening a Registered Education Savings Plan (RESP) which allows for flexible savings plans. Parents need to remember that the federal government also supplements RESPs through the Canada Education Savings Grant (CESG), which matches contributions by 20% up to an annual maximum of $500 or $7,200 over the life of a plan. • Opening a Tax-Free Savings Account (TFSA); parents may grow their assets tax-free, up to $5,000 per year. • Parents can take advantage of child care deductions such as daycare, nannies, summer camp and before- and after-school programs. • Use the Child Amount Tax Credit which allows parents to claim a tax credit on their income tax return based on an amount of $2,089 for each child under the age of 18. • Take advantage of the Children’s Fitness Amount Tax Credit which entitles parents to claim up to $500 per child to cover costs of enrolment in a qualifying fitness program.

(03/10/10)