When you have your first baby, you have to modify the way you file your taxes. To help offset the cost of raising children, the Canada Revenue Agency (CRA) offers a range of deductions and credits that allow you to optimize your income tax return.
Eligible Dependent Credit
If you are a single parent, you may qualify for the amount for an eligible dependent, on line 305. To qualify, you must live with your child, support him, and not live with a spouse or common-law partner. This non-refundable credit was formerly known as the equivalent-to-spouse amount and has a maximum claim of $11,327 as of 2015.
Child Care Expenses
If you incur child care expenses while you are working, running a business, going to school, or participating in qualifying research, you may deduct the cost of your child care expenses on your income tax return.
To calculate your allowable child care expenses deduction, use the formulas on Form T778, Child Care Expenses Deduction, and transfer the amount to line 214 of your tax return. Make sure to keep receipts from your child care providers with your records.
Working Income Tax Benefit
If you have a dependent under the age of 19 and earn at least $3,000 per year, you may qualify for the working income tax benefit. Use Schedule 6, Working Income Tax Benefit, to calculate the amount of your benefit. Transfer the amount to line 453 of your income tax return.
When you have a child, the minimum threshold for the WITB increases, so remember to apply even if you didn’t qualify when you were childless.
Disability Tax Credit
If your child has a severe mental or physical disability, you may qualify for the disability amount, the disability tax credit, and the child disability benefit.
To apply for the credit:
- Fill out part A of form T2201, Disability Tax Credit Certificate
- Have your child’s medical practitioner fill out part B.
If you qualify, you may write off an additional disability amount when claiming your child, and you may also claim the disability tax credit. Additionally, if you qualify for the Canada child tax benefit, you receive extra money with your monthly payment through the child disability benefit.
The CRA offers GST/HST tax credits to low-income families. As of 2014, you do not have to apply for this benefit. The CRA automatically gives it to you if you qualify based on your tax return. If you are married or have a common-law partner, the CRA applies this credit to either your return or your spouse or common-law partner’s return, depending on which is assessed first.
Benefits for Families
In addition to the deductions and credits listed above, you may also qualify for the Canada Child Benefit. To apply, simply indicate your permission on the Automated Benefits Application that comes with your birth registration package, or use the CRA’s My Account service.