UCCB Lucrative, But Complex

Effective January 1, 2015, the Universal Child Care Benefit will be increased from $100 per month to $160 per month for each child under the age of 6.

In 2006, the federal government implemented the Universal Child Care Benefit that provides all families for each child under the age of 6 with $100.00 per month. Effective January 1, 2015, the Universal Child Care Benefit will be increased from $100 per month to $160 per month for each child under the age of 6.  The Universal Child Care Benefit has also been expanded to include children aged 6 to 17. The amount to be paid for each such child will be $60 per month.  Remember, however, the UCCB is taxable.

However, in conjunction with this enhanced family payment, the Child Tax Credit, a non-refundable tax credit on Schedule 1 of the tax return will be replaced effective for 2015 and subsequent years.  Now all families – no matter the income level - will benefit from the new UCCB, including families whose taxable incomes were too low to benefit from the Child Tax Credit. The Child Tax credit was introduced in 2007 based on a fixed amount per child under the age of 18 years. For 2014 the fixed amount is $2,255, which provides tax relief of up to $338 per child.  However, this amount  helps only those families that pay taxes.  It won’t help those who didn’t.

As per the Department of Finance details released with the announcements, the net cost of enhancing the Universal Child Care Benefit and replacing the Child Tax Credit should be $0.7 billion in 2014-15 and $2.6 billion in 2015-16 (this is calculated as the increase in cost for the UCCB enhancement of $1.1 billion for 2014-15 and $4.4 billion 2015-16, less the savings the government reaps by replacing the CTC.  That amounts to $0.4 billion 2014-2015 and $1.8 billion 2015-16).

But, there is a third wrinkle. With the elimination of the Child Tax Credit, the Family Caregiver Tax Credit for infirm children would also no longer be claimable effective January 1, 2015.  This is not the intention of government and so amendments to the Income Tax Act will be made as required to ensure that a Family Caregiver Tax Credit for infirm minor children will be available.

Astute tax advisors will likely be in high demand, as a result of the multiplicity of changes coming to Canadian taxpayers and their families.  Scheduling early appointments might be a good defence in 2015.