Tax Tips: Maximize Change Family Benefit Provisions

Families may soon be out of monthly income due to the cancellation of the Universal Child Care Benefits in July.  It’s also time to review and optimize the Family Tax Cut provisions which are no longer available for the 2016 tax filing year. Tax and financial advisors can help.

First, go back. . .do you have any new clients who missed the Family Tax Cut in 2014 or 2015?   It’s a provision that can actually double the average refund ($1650 in 2016) for one parent in a family with two parents and one or more children under 18 who lived at home at the end of the tax year. The provision works only if the two parents are in different tax brackets.

The Family Tax Cut is a hybrid of income splitting and income averaging and it does come with some complexity. The maximum tax saving per household is capped at $2000. The credit may be claimed by either spouse but, if you’re an older parent, you can’t also do pension income splitting with the Family Tax Cut.

Higher earners are able to transfer, notionally, up to $50,000 of income to lower earners by way of an adjusted non-refundable tax credit on the income that is transferred to an “eligible relation.” This is a Canadian resident spouse or common-law partner with whom you have a child under the age of 18. That child must reside with one or both of you.

Also soon to disappear is the Universal Child Tax Benefit.  Families will stop getting it next month in favor of the new Canada Child Benefits, which are based on the 2015 family net income.  Families who have not filed a tax return will see a significant drop in their July income benefits.

©2016 Knowledge Bureau Inc. All Rights Reserved. Used with Permission.

Refer a Friend	Research	Calculators	Course Trials