Family Tax Cuts
I normally find it easy to come up with a topic to write about each month, and had been pondering this November article for a week and then just the day before my deadline, the Federal Government announces some interesting tax cuts that affects every family with children under age 18.
So now my topic is an easy choice!
The announcement that is not getting as much attention, but will affect virtually every family is the increases made to the Universal Child Care Benefit (UCCB). Until now, families with children under age six received $100 per month (taxable income).
Now the amount is increased to $160 per month for children under six and they have created a new benefit for children six to 17: $60 per month. The math works out to $1920/year for children up to age five and $720/year for children to age 17.
This isn’t completely new money; they have removed the Children’s Tax Credit which was a non-refundable credit worth $338 per child under 18. But still the change puts more money in families’ pockets: $2.6 Billion is the estimated net “cost” to the government; but that’s $2.6 Billion in the hands of families (and I’m sure 99% will put the cash back into the economy; rather than save it!)
Although the new UCCB is effective January 1 2015, it will be paid retroactive in July 2015 (up to six month of benefits will be received in the July payment).
The other positive for some families with this announcement is that lower income families and single parents often didn’t benefit from the Children’s Tax Credit because it was a “non-refundable tax credit”. If you didn’t pay taxes, it didn’t help you. Now some lower income families really will benefit with more monthly cash through the UCCB.
The second big announcement that will affect some families (but not all) is the Family Income Splitting for couples with children under 18 (sharing up to $50,000 of income). This tax cut will be available for the 2014 tax year, so I’m sure many income tax software producers are scrambling (as soon as they get the fine print from Canada Revenue Agency or CRA).
And the critics think it will only help the rich. That was the reason for putting a cap of $2,000 on it. I did some “what ifs” with some real families:
The first family: one spouse earns $27,500 and the other earns $70,500. Ok, decent income, but they likely don’t consider themselves “wealthy”. By being able to split $16,500 of the income, they may be saving over $1,100 per year.
Here’s another family: one spouse earns $67,000, the other about $5,000; by splitting $23,000 of income, the tax savings could be $1,600.
That’s real tax savings for families that will likely spend their extra cash flow in our communities.
If both spouses earn income under $44,000 then there are no savings as both are in the lowest federal tax bracket.
A couple of months ago, the Children’s Fitness Tax Credit was increased to $1,000 from $500. This is a good break for those families with kids in some of the more expensive activities like hockey and dance (but remember it only increases the actual tax break to $150 from $75; not exactly a “windfall”.) The really good news was changing it to a refundable tax credit to the lower income families or single parents that may pay no taxes and have received no benefit in the past.
As the governments continue to tweak our personal income tax system, it ensures that I will be in business for a while: since fewer and fewer tax payers want to complete and file their own taxes (in case they miss something!). If our government ever introduced a flat tax, I would be out of business!
See you at tax time! CRA opens E-Filing on February 9 2015; my team and I will be ready when you are!
Anni Markmann is a tax professional working, living, and volunteering in our community. Contact Annir at 204-422-6631 or firstname.lastname@example.org or 36 Dawson Road in Ste Anne.