Written by: Gwyneth James MBA CPA, CGA
It’s an occupational hazard to be curious about the impact of highly-publicized tax changes so I did a little research this past week on the new Canada Child Benefit (CCB). Families will receive a monthly fixed amount per child that will decrease as their family income increases above $30,000. The CCB is generous and is tax-free. The maximum a family can receive is $6,400 annually per child under 6 and $5,400 annually per child 6-17 years old. Payments will start this July based on income reported on your 2015 tax return.
It is very complicated to try and determine whether families will really be better off with this new structure because so many other tax credits and benefit programs are being eliminated: Universal Child Care Benefit (new and old), Canada Child Tax Benefit (pre-2015), Family Tax Cut (2014 & 2015 only), Children’s Activity Credit and Arts Credit (2006 & 2012 respectively), and the Child Amount. One thing for sure – the time to prepare your tax return may decrease since it will be less complicated!
After running several scenarios with family incomes ranging from the very low ($30,000) to fairly high ($150,000), one spouse earning more than the other versus similar incomes, one child or two, etc. the only folks who stand to lose in the new regime are those around $75,000 family income who benefitted from the Family Tax Cut. Even for those families, if they have two children and didn’t get the full FTC the new scenario will be better.
On the whole, the changes appear to be a move in the right direction; they simplify the previous calculations which were very cumbersome and they reach the intended target of low to middle income families. Be aware, however, that you may receive a smaller refund when you file your tax return next spring.