Last week our Prime Minister announced the Family Tax Cut. Essentially at a campaign-style event Prime Minister Harper announced how the government intends to spend the coming budget surplus. At the core of the proposed tax relief program is an income splitting measure and it is complimented with enhancements to the Universal Child Care Benefit (UCCB) and increases to the Child Care Expense Deduction. Since the announcement last week I have been asked by a few folks how they can take advantage of the tax cuts. I believe a common thought for many following the announcement is, “What’s in it for me?”
The proposed tax relief package is geared towards families, specifically couples with children under the age of 18. The core of the program is an income splitting measure that will allow the higher income spouse to shift $50,000 of their income to the lower income spouse.
In addition to income splitting, enhancements to UCCB were also announced. The current program provides a monthly benefit of $100 per child under the age of 6. That benefit has been increased to $160 a month. As well a new monthly benefit of $60 was introduced for children aged 6 through 17. A portion of the additional UCCB payments are funded by the elimination of the Child Tax Credit. The enhanced UCCB payments will take effect January 2015, however they will be reflected in monthly payments to recipients in July 2015 – essentially families that are eligible will get 6 months worth of enhanced payments in one lump sum in July 2015. The benefits received will be taxable for the lower-income spouse.
As well, the government announced a $1,000 increase in the maximum dollar amounts that can be claimed under the Child Care Expense Deduction.
According to government figures the new tax relief will help approximately 4 million families with an average of $1,140 per year in tax relief or benefits. The tax cuts are expected to cost the government $3.1 billion in 2014-15 and $4.5 billion in 2015-16, the measures will cost approximately $26.8 billion over the next six years.
What’s in if for me? For families with kids under the age of 18 - lots! Last week’s announcement was designed for you. I encourage families in this category to contact their accountant and ensure they take full advantage of the tax relief. For single parents or couples with young children, but where both parents are in the same tax bracket last week’s announcement was not as exciting. While the expansion of the UCCB and increases to the Child Care Expense Deduction will be helpful, unfortunately the core of the program, the income splitting, will not be beneficial. For couples with no children or who have adult children unfortunately there was nothing in the family tax cut for you.
This information transmitted is intended to provide general guidance on matters of interest for the personal use of the reader who accepts full responsibility for its use, and is not to be considered a definitive analysis of the law and factual situation of any particular individual or entity. As such, it should not be used as a substitute for consultation with a professional accounting, tax, legal or other professional advisor. This commentary reflects my opinions alone, and may not reflect the views of National Bank Financial Group.