Category Archives for "Personal Income Tax"

How Can You Participate in the Government’s Home Buyer’s Plan?

By Randall Orser | Personal Income Tax

The Home Buyers Plan is a government program that allows you to withdraw up to $25,000 in a calendar year  from your registered retirement savings plans (RRSPs) to buy or build a qualifying home for yourself or for a related person with a disability.

How to Participate in the HBP:

  • You must be considered a first-time home buyer, this is a person who has not occupied a home that you, your spouse, or common law partner owned in a four-year period prior to withdrawing funds.  
  • You must have a written agreement to buy or build a qualifying home for a related person with a disability or to help a related person with a disability buy or build a qualifying home.
  • You or your related person with a disability must intend to occupy the qualifying home as your principle residence within one year of building or buying it and it must also be occupied as a principle residence.
  • You may be able to participate again if your repayable HBP is at zero at January 1stin the year of your next withdrawal

To Meet the Withdrawal Conditions:

  • You must be a resident of Canada at the time of the withdrawal
  • You have to receive all withdrawals in the same calendar year
  • You cannot withdraw more than $25,000
  • You can only withdraw from your own RRSP, but you can withdraw from more than one RRSP and your RRSP issuer will not withhold tax on withdraws of $25,000 or less
  • Usually you cannot withdraw from a locked-in RRSP or a Group RRSP
  • Your RRSP contributions must stay in the RRSP for at least 90 days before you can withdraw them under the HBP or they may not be deductible for any year
  • Neither you nor your spouse or common-law partner or the related person with a disability can own the qualifying home more than 30 days before the withdrawal is made.
  • You have to buy or build a qualifying home before October 1st of the year after the year of the withdrawal.
  • You have to fill out Form T1036, Home Buyers' Plan (HBP) Request to Withdraw Funds from an RRSP for each eligible withdrawal.

You have to make sure that all HBP conditions are met otherwise your withdrawal may not be considered eligible.  You must include part or all of the withdrawal as income on tax return for the year that you received the funds. 

For more information visit the Government of Canada webpage at https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/what-home-buyers-plan.html

Buying or Selling a Home? Tax Information You Should Know

By Randall Orser | Personal Income Tax

If you buy or sell your principal residence in Canada, since 2016 you have to report the sale on your income tax return.  This ensures that only those who are entitled to the principal residence exemption can claim it. 

A principal residence can be any type of housing unit including a house, cottage, condo, apartment, trailer, mobile home or houseboat. It qualifies as a principal residence if you own the property alone or with another person, you, your spouse or children lived in it for some point during the year and you designated the property as your principle residence.

You can only have one principal residence at a time. If you sell your principal residence and buy another in the same year you can use the “plus one” rule when calculating the principal residence exemption amount.  This allows you to claim for both properties but only one can be designated as your principal residence.

What is the Principal Residence Exemption?

When you sell a housing unit you may realize a capital gain which can be taxable.  However, under the Principal Residence Exemption rules this capital gain may be reduced or eliminated if the property was your principal residence for all the years that you owned it.  If it was not your principal residence at any time, then you may have to report capital gains.   

What Happens if you Don't Report the Sale

If you do not report the sale on your income tax, or don't make the designation then you will have to ask the CRA for an amendment to your return for the related tax year.  The CRA may accept a late designation but you may have to pay a penalty.

For more information on buying and selling your principal residence visit: https://www.canada.ca/en/revenue-agency/news/newsroom/tax-tips/tax-filing-season-media-kit/tfsmk27.html

Renting Out Your Mortgage Helper? – The Taxman Cometh

By Randall Orser | Business Income Taxes , Personal Income Tax , Small Business

Once you start renting out that mortgage helper you will need to include rental income on your tax return, using form T776 Statement of Real Estate Rentals.

You must keep accurate records of your rental income and expenses each year and retain them for six years.  These records help you figure out your net profit for the year. The tax you pay will depend on the net income from the rental; any losses will be deducted from your other income and if you have no other income will be carried forward to the next year. Whether a long-term or short-term rental, most rental receipts are considered income for tax purposes.

If your mortgage helper is for a parent, grandparent, or sibling, they are considered a ‘related person’. You may still have to report the income as rental income, however, if you’re renting below fair market value, you won’t be able to write-off any losses, and will have to report the income differently. 

Airbnb is a big thing now, and you need to realize if you’re doing this regularly, then you need to claim it as rental income. You get the same expenses as if it was a long-term rental, plus you can write off bedding, towels, and soap etc. that you use exclusively for this rental. If you supply meals, then the income may be considered business income and not rental income.

Your mortgage helper can definitely help pay for the mortgage and make your dream home more affordable. With experience, managing the rental side does get easier. Finding a good property manager, lawyer and tax preparer can help you manage the details.

For more information about renting visit https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4036/rental-income-2016.html

Avoid These Common Mistakes When Claiming Charitable Contributions

By Randall Orser | Personal Income Tax

Donating to a charity can be a very feel good experience; as well it can help on your taxes by reducing how much you pay. However, most people make some pretty common mistakes when either donating or claiming the donations on their personal tax returns. We’ll do our best to enlighten you on what to avoid when claiming donations.

Each Spouse Claims Only Their Donations

This is the most common mistake most taxpayers make, each claiming only their donations. As a married, or common-law, couple you can combine your donations. This allows one spouse to take advantage of a higher deduction, or maybe they benefit far greater than the other spouse claiming the donations. Whose name is on the donation receipt is irrelevant. 

You get a higher deduction when claiming more than $200 in donations. On the first $200 of donations you get a 15% tax credit, and the amount over $200 you get a 29% tax credit.  

For Example, Susie has $50 in donations while her husband, Eric, has donations of $190. Separately, they are under the $200, and Susie would get a tax credit of $7.50, while Eric would get $28.50. If they were to combine these donations, one would be claiming $240 in donations. The credit would be $30 ($200 x 15%) plus $11.60 ($40 x 29%) for a total of $41.60. If Eric were to claim the donations he’d get an addition $13.10, and, if Susie were to claim them she’d get an additional $34.10. This may make more of a difference on either’s tax bill depending on their income.

No Receipt For The Donation

This is a common one for people who drop coin or bills into the boxes and cans strewn throughout their city or town. This may add up during the year, however, without a receipt or other proof, you probably won’t get away with the deduction. 

This also occurs when you get people coming to your door, and asking for a donation. If it’s a legitimate charity, you will get a receipt right there and then.

What are donation schemes and why should I avoid them?

People are sometimes approached to donate to charities or other qualified donees through tax shelter arrangements. Before you decide to donate in this way, you should be aware of the risks associated with participating in certain tax shelter donation arrangements including:

  • Gifting trust arrangements;
  • Leveraged cash donations; and
  • Buy-low, donate-high arrangements.

Promoters of such shelters must obtain a tax shelter number from the Canada Revenue Agency (CRA). The CRA uses the tax shelter number to identify the tax shelter and its investors, but offers no guarantee that taxpayers will receive the proposed tax benefits. 

The CRA reviews all tax shelters to ensure that the tax benefits being claimed meet the requirements of the Income Tax Act. The CRA has audited many of these gifting arrangements. Generally, the CRA reduces the amount of the tax credit to no more than the taxpayers' cash donation, and in many cases it is reduced to even less than that. In some cases the credit is reduced to zero. The CRA may also charge interest and penalties.

I have found that when these kinds of schemes go to court, CRA usually wins. I know someone who was caught up in the art scheme some time ago, where you buy a piece of art for cheap and then donate it to a charity at an inflated price (usually way above fair market value). 

What types of gifts qualify for charitable tax credits? 

Examples of donations that do usually qualify for charitable tax credits include:

  • Money;
  • Securities;
  • Ecologically sensitive land;
  • Certified cultural property;
  • Capital property;
  • Personal-use property (such as prints, etchings, drawings, paintings, sculptures, jewellery, rare folios, rare manuscripts, rare books, stamps, and coins); and
  • Inventory (such as art, antiques, rare books).

The following do not usually qualify for charitable tax credits: 

Contributions of services, such as time, skills, effort;

Certain admission fees to events or to programs (e.g., fees for daycare or nursery school facilities);

The purchase price of a lottery ticket or other chance to win a prize, even though the lottery proceeds benefit one or more charities; and

  • The payment of tuition fees (exceptions exist). 

These common mistakes for charitable donations can end up costing you quite a lot in taxes. Always make sure you get a receipt, look at the best possible scenario when it comes to deducting charitable donations, and don’t fall for the schemes that may save you initially but end up costing you way more later on.

 

What Can I Deduct as a Business Expense?

By Randall Orser | Business Income Taxes , Personal Income Tax

What Can I Deduct as a Business Expense? 

This is a question that we get asked often.  The answer is if this expense was paid in an effort to earn business income then yes, it is deductible.  If it was not used to earn business income, then the answer is no. 

The answer that the Canada Revenue Agency (CRA) has provided is quite simple: a deductible business expense is any reasonable current expense (cost) you paid or will have to pay to earn business income (revenue). Though reasonable is determined by CRA and not you. 

Personal Expenses which are commonly audited. 

Travel Expenses – only trips for business purposes such as a meeting or conference are deductible, and this only includes airfare and accommodations for the duration of the meeting.

Shareholder/Employee Medical Expenses – unless you have set up a formal health insurance plan in your company, health expenses paid for shareholders and employees are not deductible.

Non-business meals – Unless a meal is to try and earn business income, such as taking a client out for lunch or dinner it is not deductible. Taking yourself out for lunch is not deductible!

Expenses Deductible for Business Purposes

Here is a list of the types of expenses that are deductible for business purposes, they are all linked to the CRA information site for further information.

This is a long list and properly accounting for your business expenses can be difficult, but it is our job at Number Crunchers® to figure this out for you.

Why does Your Marital Status Matter for Taxes?

By Randall Orser | Personal Income Tax

I get this question a lot. People who are married usually just assume that they have to file together as they’re married, and that’s correct. However, those living together, but not married, must also state their marital status to Canada Revenue Agency (CRA). And, you must file as common-law if you are in a relationship with the person you’re sharing accommodation.

So why does marital status matter? Your marital status affects your child and family benefits. The Canada Revenue Agency (CRA) uses your family net income to calculate them, so they may change when your marital status changes.

The CRA will recalculate your benefits and credits based on:

  • your adjusted family net income
  • the number of children you have and their ages
  • the province or territory you live in

What is your marital status?

The definitions of the following terms will help you determine your marital status.

Spouse

A spouse is someone you are legally married to.

Common-law partner

You have a common-law partner if you are living in a conjugal relationship with someone who is not your spouse and at least one of the following applies:

  • you have been living together for at least 12 continuous months
  • this could include any period you were separated for less than 90 days because of a breakdown in the relationship
  • he or she is the parent of your child by birth or adoption
  • he or she has custody and control of your child (or had custody and control right before the child turned 19) andyour child is completely dependent on that person for support

Separated

You are separated when you start living separate and apart from your spouse or common-law partner because of a breakdown in the relationship. The breakdown in the relationship must last for at least 90 days and you do not reconcile in that time. A separation of less than 90 days is not considered a separation for child and family benefits. Once you have been separated for 90 days, the effective date of your separation is the first day you started living separate and apart.

If you continue to live together and share parental and financial responsibilities, the CRA will not consider you to be separated for administering the CCTB and GST/HST credit legislation.

If the separation is involuntary, you are still considered to have a cohabitating spouse or common-law partner. Involuntary separation could happen when one spouse or common-law partner is:

  • away to go to school
  • away for work or health reasons
  • incarcerated 

How does your marital status affect your benefits and credits?

Canada child tax benefit

If you get married or are now considered to be living common-law, and you or your new spouse or common-law partner has children who live with you, the CRA will put all of the children on the female parent’s account.

If you are married or living common-law with a person of the same sex, one of you will get the Canada child tax benefit (CCTB) for all of the children in the household.

To continue getting the CCTB, you mustfile an income tax and benefit return every year, even if you did not have income in the year. If you have a spouse or common-law partner, they also have to file a return each year.

Goods and services tax/harmonized sales tax credit

If you are married or are considered to be living common-law, only one of you can receive the goods and services tax/harmonized sales tax (GST/HST) credit. The CRA will pay the credit to the person whose return it assesses first. The amount will be the same, regardless of who in the couple receives it.

If you become separated, widowed, or divorced, the CRA will determine your eligibility and tell you if you are entitled to receive the GST/HST credit.

Working income tax benefit advance payments

If your marital status changes, you will need to submit a new working income tax benefit advance payments application. If you do not submit a new application, your advance payments will stop until the CRA receives a new application. The application deadline date is August 31 every year.

What you need to do if your marital status changes

If your marital status changes, you need to tell the CRA before the end of the month after the month your status changed. For example, if your marital status changes at any time in August, tell the CRA about the change by the end of September.

If you have become separated, tell us after you have been separated for more than 90 consecutive days.  You can tell the CRA about your new status and the date of the change by:

  • using Change my marital status in My Account calling 1-800-387-1193

If you receive payments based on an incorrect marital status, you may have to pay back any differences in amounts once your status is changed to the current status. The CRA will go back to the month after the month your marital status changed and change your benefits from then. Visit Balance owing - Benefits overpayment for more information.

A Little Story

Dick and Jane met and decided to live together and did so happily for 15 years. Jane had two children from another relationship whom she had full custody, and Dick had one child whom he didn’t have custody. Dick was a much higher income earner, and never qualified for any benefits; however, Jane was a low-income earner with two kids. Of course, they did their taxes separately, and never thought to file as common-law. 

Then one-day Dick gets audited. It wasn’t a particularly nice audit either. The auditor found out that Jane was living in the same house, were in a relationship, and that they had been filing as single. CRA can go back as far as they wish when adjusting returns, if they believe there’s fraud, even if the fraud wasn’t necessarily on purpose. 

Unfortunately, for Dick and Jane, the auditor went back to when they first started living together, less one year, and bounced their returns, and refiled them based on being common-law. Jane being low income had benefited greatly with having two kids and received many benefits. With Dick’s income added onto Jane’s she no longer qualified for those benefits and ended up having to pay back all of the benefits she’d received in those years. In the end, this added up to over $50,000 for the benefits payback and the penalties and interest on those benefits received. Needless to say, Jane didn’t have that kind of money, and they ended up getting a loan to pay it all back.

Your marital status is very important when filing your taxes, and you must be honest, and file with the appropriate status. As you can see it could end up costing you a small fortune later on.

 

Should I Teach my Kids About Taxes?

By Randall Orser | Personal Income Tax

I think that one of the inevitabilities of life, taxes, is something that we should learn about early in life. From why we need to levy taxes, how they affect your life, from your job, business, to what you buy, it’s a good thing to know about taxes. Sadly, school doesn’t do this as well as it should, or at all, so it’s up to you parents to teach your kids about taxes. 

Working Teens

Do you have a teen with a part-time job? This is a good time to show them how taxes work and helping them prepare their tax return come the following tax season. With online resources, it would be easy for them, let’s face it their more tech savvy than their parents, to file online. Better yet, get them to find a tax preparer on their own, so they can see what it’s like when they’re an adult and have to deal with their taxes.

The younger we teach them to do something, the better they can handle it as an adult. You’d be surprised how many young adults (early to mid-twenties) come to us, and have absolutely no clue what to do, or even what they need to provide to us.

The good thing about filing a tax return each year the teen has a T4 is that this accumulates his RRSP contribution room, so when they turn 19, they can start to contribute to an RRSP. Or, for later in life the monies they earned as a teen are contributing to that future contribution limit.

Of course, when they turn 19, it’s time to register for the GST/HST tax credit too. If your child has the confidence to figure that on their own, then the better. Get them reading about taxes, and what they need to do for filing their taxes.

Purchases

When your kid, no matter the age, wishes to buy something this is a good time to teach them about consumption taxes (GST/HST and PST). It’s fun to save for something they want, they know how much that toy will cost; however, they go to buy it and now don’t have enough money as they didn’t know about the taxes (from 5% to 15% depending on the Province). They’re now sadly disappointed and have to save more for the taxes.

If you teach that whatever they want to buy they need to think about the consumption taxes, then they know they need to add more to their savings to cover such taxes. Here in British Columbia you need to add 12% onto most purchases, food is mostly an exception except for pets. For example, if your kid wants to buy a toy that’s $39.99 then they need to add $4.80 for GST/HST ($2.00) and PST ($2.80). The kid needs to save $44.79. 

As a parent, you should think about teaching your kids about taxes as early as they would be able to understand. This way the kids won’t be disappointed when buying something, nor, later in life, will they get in trouble with Canada Revenue Agency because they didn’t file their taxes for five years. Ideally, the schools would teach such things too, maybe parents need to start demanding that schools start teaching kids about real life. As Crosby, Stills & Nash sang, “Teach Your Children Well”. 

Resources

Where Your Tax Dollars Go (Department of Finance Canada)

https://www.fin.gc.ca/taxdollar/text/fanfold/pamphlete.pdf

CBC News report, Feb 2018

https://www.cbc.ca/news/business/tax-dollars-1.4545415

Doing Your Taxes (Canada Revenue Agency)

https://www.canada.ca/en/services/taxes/income-tax/personal-income-tax/doing-your-taxes.html

Get ready to do your 2017 income tax and benefit return (Canada Revenue Agency)

https://www.canada.ca/en/revenue-agency/campaigns/taxes-get-ready.html

How to Retire the Right Way

By Randall Orser | Personal Income Tax

An Ipsos poll stated that 55% of respondents indicated they planned to spend their retirement years travelling, while 54% indicated they wanted to spend more time with their family. Are you a small business owner harboring those same retirement dream? If so, you need to start thinking long and hard about how you plan to retire from your company. Retiring from a small business is not quit the same as retiring from that 9 to 5 job. You need to figure out how your retirement plans will impact your business, and how you will make a graceful exit from it. The following planning tips will help you retire the right way from your business.

Succession Planning

The best move that you can make on your retirement plans is to come up with a succession plan way ahead of when you eventually plan to retire. The earlier you start thinking about training your successor, the quicker you can start imparting your knowledge to someone on your team. When hiring employees have management training in mind, focus on helping team members learn to do your job in your absence, and do whatever you can to build a team that is invincible. Are you planning on selling your small business as part of your succession plan? Having a strong team in place will make selling the business that much easier.

Tax Planning

For small business owners who plan on retiring someday, the critical thing is advanced tax planning. You need to know how the tax laws will impact your retirement plans if you don’t want to get hit with unpleasant tax penalties when you retire. Find a good accountant and financial planner that specialize in retirement, so you know the significance of everything from a diversified retirement savings plan to self-directed retirement funds and capital gains taxes. When you adopt a ‘big picture’ mentality in regard to your tax planning, making your retirement dreams a reality becomes an easier goal to achieve.

Retirement Age Planning

Have you determined an age when you plan to retire? As a small business owner, you need to figure that out, however, that doesn’t mean you have to retire at 65, it can be before or after that. Find someone who is a certified retirement specialist to better understand your options. With careful financial planning, you could retire early, maybe 45, 50 or 55. You might even be able to develop a retirement plan that allows you to hand over control of your small business while retaining ownership rights. Your retirement doesn’t have to begin at 65, and you may find it amazing what options you have to explore.

For a sound financial future as a small business owner, it’s critical that you start retirement planning. Once you realize how many events can impact your future and small business (health, technology, etc.), you start to see the importance of developing a long-term retirement plan for your company. 

 

Is a Registered Education Savings Plan (RESP) Worth it?

By Randall Orser | Personal Income Tax

You may already know what a RESP is; however, here’s some information just in case you aren’t sure. A registered education savings plan (RESP) is a contract between an individual (the subscriber) and a person or organization (the promoter). Under the contract, the subscriber names one or more beneficiaries (the future student(s)) and agrees to make contributions for them, and the promoter agrees to pay educational assistance payments (EAPs) to the beneficiaries.

A RESP is a great way for you to save for your children’s education, much like you’re saving for your retirement with an RRSP. Look at what you can afford to put away and do a monthly contribution so it’s easier on the pocketbook. A RESP is also a great way for the grandparents or aunts/uncles to contribute, just remember that you can only contribute up to a lifetime maximum of $50,000 per child.

Rather than all those toys, and other things that kids just grow out of, this is a great present (the kid may not realize it now though) for when the child is grown and off to post-secondary education. You can even show the child how the fund is growing, and maybe have them contribute when they get jobs.

The advantage of a RESP is that the withdrawals are taxable to the beneficiary. The income earned is paid as educational assistance payments (EAPs). Beneficiaries include the EAPs in their income for the year in which they receive them. However, they do not have to include the contributions they receive in their income. The student will get a T4A with the EAPs in Box 042.

An educational assistance payment (EAP) is the amount paid to a beneficiary (a student) from a RESP to help finance the cost of post-secondary education. An EAP consists of the Canada Education Savings Grant, the Canada Learning Bond, amounts paid under a Provincial Education Savings Programs and the earnings on the money saved in the RESP.

Another great thing about RESPs is the government gives you money in the form of grants. These grants can be the Canada Education Savings Grant (CESG), Canada Learning Bond (CLB), or any designated provincial education savings program. If the government is giving out money you may as well take some and help your child out at the same time. 

Canada Education Savings Grant (CESG)

Employment and Social Development Canada (ESDC) provides an incentive for parents, family and friends to save for your child's post-secondary education by paying a grant based on the amount contributed to a RESP for the child. The CESG money will be deposited directly into the child's RESP.

No matter what your family income is, ESDC pays a basicCESG of 20% of annual contributions you make to alleligible RESPs for a qualifying beneficiary to a maximum CESG of $500 in respect of each beneficiary ($1,000 in CESG if there is unused grant room from a previous year), and a lifetime limit of $7,200.

Canada Learning Bond (CLB)

Employment and Social Development Canada (ESDC) also provides an additional incentive of up to $2,000 to help modest-income families start saving early for their child's education after high school (post-secondary education). 

For families entitled to the national child benefit supplement (NCBS) for their child, the CLB will provide an initial $500 to children born on or after January 1, 2004. To help cover the cost of opening a RESP for the child, ESDC will pay an extra $25 with the first $500 bond. Thereafter, the CLB will also pay an additional $100 annually for up to 15 years for each year the family is entitled to the NCBS for the child. 

Certain provinces encourage families to plan and save for their children's post-secondary education by offering incentives to open an RESP. Currently, only Alberta, Quebec, and Saskatchewan offer such incentives. 

Let’s face it, and education is somewhat pricey, and will probably only go higher. We’re better off than some counties as our post-secondary education system is highly subsidized. That said, it doesn’t hurt to start early in a child’s life to start saving for their education and get other family members involved. Make it fun and let the child know that you’re thinking of them by saving for their future.

 

What Child and Family Benefits are Left?

By Randall Orser | Personal Income Tax

The federal government in its infinite wisdom decided to eliminate many benefits for families with children and did prop up the one benefit left giving families a monthly stipend depending on their income. Now the only benefit left is the Canada child benefit (CCB).

What is the Canada Child Benefit (CCB)?

The Canada child benefit (CCB) is a tax-free monthly payment made to eligible families to help them with the cost of raising children under 18 years of age. The CCB might include the child disability benefit and any related provincial and territorial programs, such as the BC early childhood tax benefit.

The Canada Revenue Agency (CRA) uses information from your income tax and benefit return to calculate how much your CCB payments will be. To get the CCB, you have to file your return every year, even if you did not have income in the year. If you have a spouse or common-law partner, they also have to file a return every year.

Benefits are paid over a 12-month period from July of one year to June of the next year. Your benefit payments will be recalculated every July based on information from you and your spouse’s (if applicable) income tax and benefit returns from the previous year. If any of your information from the following list changes during the year, we will recalculate your benefit the month after the change occurs.

For July 2018, in its Fall Economic Statement, the Government proposes to strengthen the CCB by increasing the benefits annually to keep pace with the rising cost of living. In the fall of 2016, the Government committed to index the CCB to inflation starting July 2020, but the government believes that a growing economy and improved fiscal track means it can deliver on this commitment two years sooner. 

To be eligible for the Canada child benefit (CCB), you must meet all of the following conditions:

  • You must live with the child, and the child must be under 18 years of age.
  • You must be primarily responsible for the care and upbringing of the child.
  • You must be a resident of Canada for tax purposes.
  • You or your spouse or common-law partner must be:
    • a Canadian citizen
    • a permanent resident
    • a protected person
    • a temporary resident who has lived in Canada for the previous 18 months,                    and who has a valid permit in the 19th month
    • an Indian within the meaning of the Indian Act

What Benefits or Credits Could you Get?

When you apply, the Canada Revenue Agency (CRA) will determine if you are eligible for:

  • the Canada child benefit
  • any related provincial or territorial programs

The CRA will also register your child for the goods and services tax/harmonized sales tax (GST/HST) credit.

When Should you Apply?

Apply for the CCB as soon as possible after:

  • your child is born
  • a child starts to live with you
  • you or your spouse or common-law partner meet the eligibility conditions

CCB payments can begin the month after you become eligible, as long as you are still eligible at the beginning of the current month.

You should apply even if:

  • you share custody of your child
  • your child is living with you for a determined temporary period of time
  • your current family net income is too high to get the CCB (you might be eligible for other benefits)

Although the Canada child tax benefit and the universal child care benefit are no longer being issued, you can still request an adjustment for previous years, if you were eligible.

Who Should Apply?

The individual who is primarily in charge of the care and upbringing of the child should apply for the CCB. You are primarily responsible for the care and upbringing of the child if you:

  • supervise the child’s daily activities and needs
  • make sure the child’s medical needs are met 
  • arrange for child care when necessary

For CCB purposes, when a male and a female parent live together in the same household as the child, the female parent is usually considered to be primarily responsible for the child. In this situation, the female parent should apply. If the male parent is primarily responsible, he must attach a note to his application from the female parent. The note must state that he is primarily responsible for all of the children in the household.

If two parents of the same sex live together in the same household as the child, one parent should apply for the CCB for all of the children in the household. You are not considered primarily responsible if the child is legally, physically, or financially maintained by a child welfare agency. For more information on this situation, see children's special allowances.

Do you Share Custody?

You share custody if the child lives with you and another individual in separate residences on a more or less equal basis. The child might regularly alternate between residences in the following cycles:

  • four days with one person and three days with the other
  • one week with one person and the next week with the other
  • any other regular alternating cycle

Both individuals must be primarily responsible for the child's care and upbringing when the child lives with them. Each eligible individual will get 50% of the payment he or she would have received if the child lived with him or her all of the time. If you have just entered into a shared custody situation you have to apply for benefits.

Although a court order might state which individual should receive the CCB, the CRA is bound by the Income Tax Act, which is the legal authority the CRA uses to determine who eligible individuals are. If you start or stop sharing custody of a child, let us know as soon as possible.

How is the CCB Calculated?

Your Canada child benefit (CCB) payments are calculated for the period of July of one year to June of the next year using the following information:

  • the number of children who live with you
  • the ages of your children
  • your adjusted family net income
  • your child’s eligibility for the child disability benefit  

CRA recalculates your payment every July based on your adjusted family net income from the previous year. Your net income is the amount from line 236 of your income tax and benefit return. Your family net income is your net income plus the net income of your spouse or common-law partner, if you have one.

CRA "adjusts" your family net income so that we don't count any universal child care benefit (UCCB) and registered disability savings plan (RDSP) payments you receive. CRA does this to make sure that people with low and modest incomes get the most benefits they can. However, if you have to repay any UCCB and RDSP amounts, they will include them as part of your adjusted family net income.

Your marital status affects how your benefits are calculated. If your marital status changes, you need to tell CRA before the end of the month after the month your status changed. For example, if your marital status changed in August, tell them about the change by the end of September.

To estimate the amount of CCB you might be entitled to, as well as any benefit from CCB-related provincial or territorial programs and other benefits, use the child and family benefits calculator. Calculations are based on the information you enter in the calculator fields.

Basic Benefit for July 2018 to June 2019

CRA calculates the Canada child benefit (CCB) as follows:

  • $6,496 per year ($541.33 per month) for each eligible child under the age of six
  • $5,481 per year ($456.75 per month) for each eligible child aged 6 to 17

We start to reduce the amount of CCB you get when your adjusted family net income (AFNI) is over $30,450. The reduction is calculated as follows:

  • families with one eligible child: the reduction is 7% of the amount of AFNI between $30,450 and $65,976, plus 3.2% of the amount of AFNI over $65,976
  • families with two eligible children: the reduction is 13.5% of the amount of AFNI between $30,450 and $65,976, plus 5.7% of the amount of AFNI over $65,976
  • families with three eligible children: the reduction is 19% of the amount of AFNI between $30,450 and $65,976, plus 8% of the amount of AFNI over $65,976
  • families with four or more eligible children: the reduction is 23% of the amount of AFNI between $30,450 and $65,976, plus 9.5% of the amount of AFNI over $65,976

The CCB is now pretty much the only kid friendly tax benefit from our government. Only time will tell if it will actually benefit the lowest income people or not.

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