The Canadian government’s provision of education, childcare, and disability benefits is a vital social safety net that helps ensure that all Canadians have access to the support they need to live fulfilling and productive lives. By providing financial assistance to families and individuals in need, the government is helping to create a more equitable and inclusive society, where everyone has the opportunity to succeed.
These benefits not only provide financial assistance, but they also help to promote education, healthcare, and social integration, leading to a more productive and engaged society. Through these investments, the government is helping to build a stronger and more prosperous future for all Canadians.
In this blog post, we will explore three key tax credits available for families: the Child Care Expense Deduction (CCED), the Canada Child Benefit (CCB), and the Disability Tax Credit (DTC). We will provide information on how they impact your tax liability, with links to the Canadian Revenue Agency (CRA).
Difference between Benefits and Deductions
In the taxation context for families, a benefit and a deductible are two different terms that relate to how taxes are calculated and paid.
A benefit is a type of income not subject to tax, but is considered taxable income for tax credit purposes. Benefits can include things like child care benefits (CCB), employment insurance benefits, and disability benefits. These benefits are usually paid out by the government or an employer to assist families and individuals in meeting their financial needs, and they are not subject to income tax. However, they are included in the calculation of certain tax credits, such as the Canada Child Benefit, and can impact the amount of tax that a family owes.
On the other hand, a deductible is an expense that can be subtracted from an individual’s taxable income, reducing the amount of tax that they owe. Deductibles can include things like the CCED, medical expenses, charitable donations. By deducting these expenses from their taxable income, families can reduce their tax liability, potentially leading to a lower tax bill or a larger tax refund.
While both benefits and deductibles can impact a family’s tax liability, they work in different ways. And it helps to know the difference for tax planning purposes.
- Child Care Expense Deduction (CCED)
The Child Care Expense Deduction (CCED) is a tax deduction designed to help families offset the costs of childcare, allowing them to work, attend school, or engage in other activities that contribute to their earning capacity. Eligible childcare expenses include fees paid for daycare, nursery school, babysitters, and other approved caregivers.
To claim the CCED, the child must be under 16 years of age at the end of the tax year (or have a physical or mental impairment, regardless of age). The maximum amount you can claim varies depending on your child’s age and whether they have a disability.
- For children under 7, the limit is $8,000 per year, while for children aged 7 to 16, its $5,000
- For children with disabilities (regardless of age), the limit is $11,000.
Example: Saritha and John have two children, ages 3 and 8. They paid $12,000 in childcare expenses during the year. They can claim up to $8,000 for their 3-year-old and $5,000 for their 8-year-old, resulting in a total deduction of $13,000.
You can find out more information on CCED here.
- Canada Child Benefit (CCB)
Eligible families with children under 18 years of age can receive a tax-free monthly payment called the Canada Child Benefit (CCB). The purpose of the CCB is to help parents with the costs of raising children. The benefit amount is based on your adjusted family net income, the number of children you have, and their ages.
Under the CCB, families can claim a maximum annual benefit of
- $6,997 as of Jul 2022 (and $7,437 as of Jul 2023) per child under 6
- $5,903 as of Jul 2022 (and $6,275 as of Jul 2023) per child aged 6 through 17.
The benefit is reduced when Adjusted Family Net Income (AFNI) is over $32,797 as of Jul 2022, (and $34,863 as of Jul 2023)
The CCB is non-taxable, meaning it does not affect your tax liability. However, it’s important to file your taxes each year, as the CRA uses the information from your tax return to calculate your CCB entitlement.
More information on the CCB can be found here:
- Disability Tax Credit (DTC)
The Disability Tax Credit (DTC) is a non-refundable tax credit aimed at helping individuals (with disabilities and severe impairments) and their families offset the additional expenses associated with living with a disability. To be eligible for the DTC, a medical practitioner must certify that the individual has a severe and prolonged impairment in physical or mental function.
Additionally, if a family member supports an individual with a disability, they may be eligible to claim the DTC as a caregiver tax credit. For example, if you are a parent of a child who qualifies for the DTC, you can claim the credit on your tax return, reducing your tax liability.
More information on the DTC can be accessed here.
- GST/HST Credit
In addition, the government also allows modest to low income families to claim GST/HST Credit to offset taxes they pay on consumer goods and services. These credits are paid out quarterly by CRA to eligible individuals and families that are tax filers.
In conclusion, the Canadian government offers a range of tax deductions and credits to help families with the cost of child care, education, disability, and other expenses. These deductions and credits can significantly reduce a family’s tax liability, freeing up funds for other essential expenses and providing financial security.
By taking advantage of these deductions and credits, families can plan for their future, invest in their education and well-being, and enjoy a higher quality of life. It is important for families to stay informed about the available deductions and credits and to consult with a qualified tax professional to ensure that they are maximizing their tax savings. Together, we can build a more prosperous and supportive society for all Canadian families.
Please note that rates, deductibles, and other financial items mentioned in this blog post are accurate as of the publication date but are subject to change and depend on specific family circumstances.
It is always best to double-check with the Canada Revenue Agency or consult with a qualified tax professional, such as Taxvisors, to ensure that you have the most up-to-date and accurate information regarding your tax situation.