Congratulations on your new baby! Parenting is a joy, a privilege, an adventure -, and an expense. It’s estimated that, in Canada, raising a child from birth to 18 costs the average family $10 to $15K a year. With numbers like this, you’ll want to take advantage of every tax break you can get.
That’s why TurboTax compiled this handy list of credits and benefits for new families. We’ve also highlighted the baby-related deductions and claimable expenses that can make a big difference at tax time by lowering your taxable income.
- Being a parent is expensive. The Canadian government offers various benefits to help with the cost of raising your child.
- Taking advantage of family tax credits will put money in your pocket by lowering your taxable income.
- If your family is raising a child with a disability, there are special benefits and credits to help support you.
Tax breaks that put money in your pocket
The Canada child benefit (CCB)
This tax-free monthly payment was created to help Canadian families with the cost of raising children. It provides up to $6,997 per year for each eligible child under 6, and up to $5,903 per year after that, right up until the child turns 18. The CCB was created with lower-income families in mind, so if your household income is too high, you may not qualify. Use the child and family benefits calculator to see what you’re entitled to.
GST/HST credit
The GST/HST tax credit helps low-to-modest income families offset all or part of what they pay in sales tax. In 2021, the maximum annual amount new parents can receive is $612, with an additional $161 for each child under 19. You don’t need to do anything to receive this credit. The CRA determines whether you qualify based on your tax return, and payments are made quarterly.
Tax breaks that lower your tax bill
Medical expenses
No matter how sleep-deprived you are, don’t forget to claim the medical expense tax credit. Hospital stays, prenatal care with a nurse, or fertility treatments can be claimed as medical expenses to a maximum of $2,479 or 3% of your net income (whichever is less).
Child care
Even though parenting is a 24/7 job, there’s no special tax credit for being a stay-at-home mom or dad. You can, however, deduct child care expenses if both of you are working, or going to school, at least part of the time. Whether you opt for a nanny, an infant daycare, or even the occasional babysitter, the parent with the lower income can deduct up to $8,000 in child care expenses until your child reaches the age of six (at which point the maximum deduction falls to $5,000). For children under six with a disability claim, the limit is set to $11,000
Canada workers benefit (CWB)
The Canada workers benefit (CWB) is a refundable tax credit to help low income Canadians in the workforce receive tax relief payments of up to $1,395 for single individuals and $2,403 for families. While there are strict eligibility requirements, the maximum net income amounts are different depending on your total income and what province you live in.
TIP: You may receive up to half of your CWB in advance payments by applying for it on your CRA My Account or submitting form RC201. Calculate your CWB using the calculation sheet here.
Tax breaks by province or territory
Depending on what part of the country you live in, your growing family may be eligible for specific child and family benefit program(s) offered through your province or territory. For the complete list, visit the Government of Canada website.
Tax breaks for families living with disability
Disability tax credit
If your baby is born with a disability, or develops one down the road, your family is eligible for the disability tax credit (DTC). All you need to do is ask a medical practitioner to fill out this form T2201 and send it to the CRA for approval. Note that DTC is a non-refundable tax credit, which means you can use it to lower your taxable income, but it can’t be used to increase the size of your tax refund.
Child disability benefit
Your family may also be eligible for the child disability benefit (CDB) of up to $2,985 per year. If you’ve qualified for the DTC credit, there’s no need to apply for the CDB. This tax-free amount, which your child receives until the age of 18, will be added to your CCB payment every month automatically.
Canada caregiver credit
If your child has a physical or mental infirmity, the Canada caregiver credit, a non-refundable tax credit of $2,350, is also worth investigating.
As a new parent, time is a rare and precious commodity. But finding a few moments to wrap your head around all the family benefits, credits and deductions you’ve got coming to you is well worth the push, putting money in your pocket for the busy (and expensive!) years ahead.
Get the break you deserve.
For a very busy new parent, being eligible for tax breaks is one thing, but making time to find and claim them is another. TurboTax searches for all your credits and deductions automatically, because new parents deserve all the breaks they can get.
