Accessing home equity in retirement – the reverse mortgage
August 12, 2019Amanda Finke, CPA, CA
September 11, 2019Raising children is expensive and, in recognition of that fact, the federal government has, for more than half a century, provided financial assistance to parents to help with those costs. That assistance has ranged from monthly Family Allowance payments received by families during the 1960s to its current iteration, the Canada Child Benefit.
While all of the various programs providing financial assistance to families have had the same underlying purpose, the structure of those programs has evolved over the years. Generally, those changes have involved a move to a more means-tested benefit system and have, as well, recognized the additional costs which must be incurred by parents who are raising a child who has a disability. The current rules for the Canada Child Benefit (CCB) program are as follows.
The CCB is a tax-free monthly amount paid to parents of children under the age of 18. Each “benefit year” runs from July 1 to June 30, and eligibility for and the amount of benefit for which a particular family may qualify is based on both current family size, and family income for the previous year. CCB amounts are paid around the 20th of each month.
For instance, the current benefit year started on July 1, 2019 and will run until June 30, 2020. The amount of benefit payable to a particular family during the current benefit year is based, in part, on the income received by the family during the 2018 tax year. It is therefore necessary that the parents in a family have filed tax returns for the 2018 tax year, as the Canada Revenue Agency uses the figures in those returns to determine the amount of benefit for which the family is eligible. More specifically, the CRA uses the figure found on line 236 of the 2018 tax return as the income figure which determines the amount of CCB which a family can receive between July 2019 and June 2020. Where no tax returns for the previous year have been filed, no benefits can or will be paid during the current benefit year.
For a family which has a child or children under the age of 18, the following benefit amounts are payable during the current (July 1, 2019 to June 30, 2020).
$6,639 per year ($553.25 per month) for each eligible child under the age of six, and
$5,602 per year ($466.83 per month) for each eligible child aged 6 to 17.
The amounts set out above represent the basic benefit payable for each eligible child. Where, however, family net income for the previous year is more than $31,120, the amount of benefits payable are reduced. The benefit reduction for families of different sizes is as follows.
For families with one eligible child, the reduction is 7% of the amount of family net income between $31,120 and $67,426, plus 3.2% of the amount of family net income over $67,426.
For families with two eligible children: the reduction is 13.5% of the amount of family net income between $31,120 and $67,426, plus 5.7% of the amount of family net income over $67,426.
For families with three eligible children: the reduction is 19% of the amount of family net income between $31,120 and $67,426, plus 8% of the amount of family net income over $67,426.
For families with four or more eligible children: the reduction is 23% of the amount of family net income between $31,120 and $67,426, plus 9.5% of the amount of family net income over $67,426.
Families raising a child or children who have a disability inevitably face additional costs and such families are consequently eligible for additional amounts in the form of the Child Disability Benefit.
The basic requirements for the child disability benefit are the same as for the CCB, in that the child must be under the age of 18 and living with a parent. However, for purposes of the CDB an additional requirement is imposed, in that the child in respect of whom the CDB is claimed must be eligible for the federal disability tax credit. A child is eligible for that disability tax credit when a medical practitioner certifies, on Form T2201, Disability Tax Credit Certificate, that the child has a severe and prolonged impairment in physical or mental functions, and the Canada Revenue Agency (CRA) approves that certification.
Eligible families can, during the current (July 2019 to June 2020) benefit year, receive (in addition to the basic CCB) up to $2,832 ($236.00 per month) for each child who is eligible for the disability tax credit.
As is the case with the basic CCB, the amount of CDB which may be received is reduced as family income increases, as follows.
For families with one child eligible for the CDB, the reduction is 3.2% of the amount of family net income over $67,426.
For families with two or more children eligible for the CDB, the reduction is 5.7% of the amount of family net income over $67,426.
When a child is born, families must make an application for the CCB, and the process for doing so is outlined on the CRA website at https://www.canada.ca/en/revenue-agency/services/child-family-benefits/canada-child-benefit-overview/canada-child-benefit-apply.html. Once the initial application is filed and approved, parents need only to file a tax return each year in order to continue receiving that benefit.
The CRA provides comprehensive information on both the CCB and the CDB on its website at https://www.canada.ca/en/revenue-agency/services/child-family-benefits/canada-child-benefit-overview.html and also publishes a guide to that program, which can be found on the same website at https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4114.html.
The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.