Tax tips for parents

Why read this?

• Your client is a new parent or has had a child come to live with her
• Your client has a child and is a new Canadian resident.

What to do?

1. Apply for and report benefits

Use the RC66 Canada Child Benefits Application to apply for the Canada Child Benefit (CCB) and the Child Disability Benefit, or apply online using CRA’s My Account. Your client can also apply when she registers a birth.

• The CCB is worth a maximum of $6,400 per year for each child under the age of six and $5,400 per year for each child aged 6 to 17. These amounts start being reduced when the adjusted family net income is over $30,000.
• For heterosexual couples who live in the same home as the child, CRA considers the mother the primary caregiver, so she’ll receive all social benefits. However, the lower-income parent must report the income on his or her return, says Cheryl Mont, accountant at Harris and Wright LLP.
• Same-sex parents can designate a primary caregiver in their application.

TIP: Although regular payments for the Canada Child Tax Benefit, the National Child Benefit Supplement, and the Universal Child Care Benefit are no longer being issued after June 2016, you can still request an adjustment for prior years.

2. Claim expenses and credits

Tip: Your client may be able to transfer any unused amount to her partner. Complete Line 326 of the return and Schedule 2, Federal Amounts Transferred from Your Spouse or Common-Law Partner to determine the amount.

Child care (line 214)

• Claim the expenses your client or her partner paid for child care while at work, school or doing research.
• The child must be under 16 at some point during the year. (If he’s disabled, the age limit does not apply.)
• Attach Form T778 Child Care Expenses Deduction to the return.
• The lower-income partner must claim expenses, unless that partner is in school (full- or part-time), suffering a long-term illness, in prison, or your client and her partner were temporarily separated.

TIP

Mont says advertising expenses and placement agency fees incurred to locate a child care provider, and mandatory registration fees, may also qualify as child care expenses.

Children’s fitness amount (Schedule 1, line 458) and children’s arts amount (Schedule 1, line 370)

Both credits will be eliminated for the 2017 tax year.

• Your client can claim up to $500 per child in fees for sports and $250 for art programs paid in 2016.
• The children’s fitness tax credit is a refundable credit; the children’s arts amount is a non-refundable credit.
• The child must be under 16 (18 if disabled) at the beginning of the year.

Disability amount

If your client’s child is disabled, transfer the child’s unused Disability Amount to your client’s return.

• Use line 316 of the federal worksheet to calculate the child’s transferable disability amount.
• Then, use line 318 in the worksheet to calculate how much to transfer to your client.
• Enter the total on line 318 of Schedule 1.

Family caregiver amount

If your client’s child has a long-term illness, claim the Family Caregiver Amount. Your client is eligible if her child is infirm, but not necessarily disabled. CRA requires a signed doctor’s statement that includes:

• when the impairment or illness began;
• the expected duration of the impairment; and
• that the illness makes the child more dependent on personal assistance than other children of the same age.

To claim, enter the number of children for whom you are claiming the family caregiver amount in box 352 and multiply by $2,121. Claim the result of the calculation on line 367.

Child benefits

As of July 1, 2016, the Canada Child Benefit (CCB) replaced the Canada Child Tax Benefit (CCTB), the National Child Benefit Supplement (NCBS), and the Universal Child Care Benefit (UCCB). If your client was receiving the CCTB or the UCCB for a child, advises accountant Cheryl Mont, you do not need to apply for the CCB for that child. The CCB is not taxable.

Tips for separation, divorce and shared custody

• If parents share custody, and the child lives with each equally, CRA may consider both as primary caregivers. Each parent will get half the benefits payment they’d be entitled to had they been taking care of the child full time.
• If your clients are getting separated or divorced, notify CRA using Form RC65 Marital Status Change. CRA sends benefits to the primary caregiver, and it will re-calculate their payments when it’s notified of the change in marital status. The other caregiver must apply for benefits online or using the Canada Child Benefits Application.
• To designate a father as the primary caregiver, attach a signed note to the benefits application from the mother stating the father is primarily responsible for the children.
• TIP: Parents may claim the fitness and arts credits for fees paid in 2016 even if the programs start in 2017, says Mont.

Sources: Cheryl Mont, accountant at Harris and Wright LLP, and CRA.