As you may already be aware, the Canadian federal government has announced several new initiatives and tax breaks for familys in October 2014 budget update.
Before I start enumerating some of these announcements, there is a need to inform some families to proceed with a degree of cautiousness and awareness in regards to the new tax savings. Families with children under 18 years of age will definitely be receiving a lot more fund during and throughout the year. That being said, please be advised to spend it with a degree of caution as these UCCB payments are taxable benefits. Not to mention that, in addition to the fact that the government has also decided to abolish the Child Tax Credit, you could consequently be left with higher tax bill come tax time at the end of the year, if your payroll deductions have not been adjusted accordingly, given that all other factors remain the same.
Highlights of the New Tax Announcements:
1 – Family Tax Cut – Will allow families with children under 18 years old at the end of the 2014 tax year to claim up to $2,000 in tax credits by transferring income from a higher-income earning spouse to the other.
2 – Effective January 2015, the government will increase monthly Universal Child Care Benefit (UCCB) payments for children under 18 years old by $60. Note that this amount will be taxable when you file your tax return and will increase the amount of taxes payable. This should however be taken into consideration by your employer’s payroll provider going forward. If you are currently not receiving any UCCB payments, you can apply online through CRA’s My Account or by using Form RC66.
3 – Effective from 2015, the Child Tax Credit (CTC) is being abolished. Note, that will decrease your amount of available tax credits in the future, as was perhaps the case in prior tax years.
4 – Starting in 2015 the Child Care Deduction Limits will be increased by $1,000.
5 – The Children’s Fitness Tax Credit limit is being increased from $500 to $1,000 for the 2014 tax year. Furthermore the credit will become a refundable tax credit as of the 2015 tax year.
6 – A reduced Employment Insurance (EI) premium rate will be available for small businesses for 2015 and 2016 on certain eligible employee salaries on the employer portion of the EI premiums.
7 – Effective immediately, the government is allowing taxpayers to file a Notice of Objection for those who may have previously been denied the Disability Tax Credit or who will be in the future.
Furthermore, I encourage you to consult the CRA website (See Federal Government Budgets) and the Department of Finance Canada (See Announced tax cuts and increased benefits for families) for more detailed and specific information. (See Tax Tips)
What happens in theory and in practice are sometimes quite different. It will be the case for those of you who do not take the initiative to have their T1D and T1DON Forms updated as of January 1st, 2015. They will consequently risk being disappointed come tax time in 2016.
Conclusion: If you are affected by any of the UCCB and CTC changes, please make sure that you advise your employer or payroll provider so that they can make the necessary adjustment to your payroll deductions. Otherwise you could end up with an unpleasant surprise at the end of the year.
Word of Advice: While you will be receiving additional credits and funds during the year be aware that this will be somewhat offset by having more payroll and/or year-end taxes payable. Don’t spend all your new tax savings too quickly!
The good and the not so good.
Disclaimer: The information contained herein, while believed to be accurate, is not warranted to be so. It is up to the individual to verify any details that are of importance to them. The above information is for general reference only and I suggest that you should consult with your professional accountant in regards to your personal situation and for any future adjustments or discrepancies to the above information that may arise.