When $60 Equals $10
The Universal Child Care Benefit (UCCB) payment lump sums were received by most families in July. Iím sure they were a welcome payment. Just in time for vacations and school supplies. And families will continue to receive the extra $60 per child under age 18 for the rest of the 2015 year and beyond. Now before you spend it all, I need to caution you that the $60 really only means $10.
Let me explain.
First a recap of what the UCCB changes are. Last November 2014, the federal government announced changes to the UCCB. Effective January 1 2015, all families with children under 18 would receive $60 per month. For those with children under six, the UCCB would increase from $100 to $160. But the payments wouldnít be made until July 2015 and families would receive seven months worth in July. And by feedback from my clients, most families have received it by direct deposit or by cheque. (There were a few mistakes with incorrect addresses, but most of these will be resolved in August.)
Remember that the UCCB is taxable income. So when we complete your taxes next Spring, you will be including this extra $60 per month as income on your 2015 tax return (claimed by the spouse with the lower net income). That could be 26 to 40% taxes payable on the UCCB. Most families do not have taxes owing, they normally get refunds. So your refund will be lower than normal next Spring. But thatís not all.
To help offset the extra cash the government is sending to families (increase in expenses); the government eliminated the Childrenís Tax Credit. This was a non-refundable tax credit of $2293 per child under age 18. The federal credits are worth 15% so that saved taxpayers $343 in taxes. So that is an additional refund (or reduced taxes payable) that families will not be getting next Spring when your 2015 taxes are filed. Thatís the additional revenue the government will be receiving to offset most of the cost of the boosted UCCB.
I did some ďwhat-ifsĒ with some existing client returns to confirm all this math: With the taxes payable on the $60 and the elimination of the Childrenís Tax Credit, the $60 is really only worth $10. Your refund will be $600 per child less next year ($50 of the $60 per month).
I just want you to know now so your expectations are lowered. And when you ask me why your refund is so much lower next year ($600 per child), you will now know why. Iíll need to keep extra copies of this article to hand out next year to remind my family taxpayers.
Does anyone benefit more than the net $10? Yes, those low income tax payers that did not benefit from the non-refundable tax credit of $2255 per child will not be affected as much, so their $60 is more like $45 (only 25% tax potentially). Or some single parents with low incomes not paying any taxes, they could potentially keep the full $60 per month with no taxes payable.
So the government did something that affected mostly the low income families. Keep that in mind as you gripe under your breath: that those who needed it the most, did get the most benefit.
At the other end of the taxpayer spectrum, I remind all senior (65+) homeowners to apply for the Manitoba Seniorís School Tax Rebate. It was doubled this year to $470. You can only apply AFTER you pay your property taxes. Some of you in Steinbach and Ste Anne should have already paid so go ahead and apply (call me if you need a form). Those in the rural areas will have to wait until November after the taxes are paid October 31.
And I remind you that not everyone gets it. If your school taxes on your property taxes are already zero, you do not get any rebate.
The deadline to apply is March 31 2016 but donít wait!
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.