What Tax Relief Replaces the Children’s Fitness and Arts Credits?

Two federal family tax credits have disappeared in 2017: the Children’s Fitness Tax Credit and the Children’s Arts Amount. Is there anything families can do to shore up tax savings in light of this unfortunate news?

The Children’s Fitness Tax Credit (previously the Children’s Fitness Amount) provided a federal refundable tax credit of up to $75 per child when parents spent up to $500 for activities that promoted fitness for their children. That meant that even low income families benefited – you did not have to pay taxes to receive this credit. The Children’s Arts Amount provided a federal non-refundable tax credit for 15% of expenses paid by parents, up to a maximum of $250 per child, for activities that included artistic, cultural, recreational or developmental activities. While the federal government eliminated these credits for the 2017 tax year; be sure to check out what’s happened on the provincial level: some provinces may still have retained credits for some of these activities for 2017.

So what can be done to shore up the federal tax preference losses? Unfortunately, for 2017, the only federal tax relief for parents who pay for such activities is found under the Child Care Expense provisions, which would apply only if the children were sent to day camps or day sports schools. The primary goal of the camp must be to care for children, or to provide for overnight sports schools and overnight camps where lodging is involved. These expenses can be claimed only if both parents are working, or if the non-working parent is unable to care for the children at the time of the camp.  Check out the rest of the criteria for this deduction on Form T778.

For many families, the loss of the children’s fitness and arts credits will be offset by changes made to the Canada Child Benefit (CCB) programs. This is income-tested however; reducing family net income with an RRSP contribution can be a smart strategy. It will create larger refundable amounts in some cases. The CCB was introduced in 2016, at the expense of the taxable Universal Child Care Benefit and the Family Tax Cut. It is a tax free benefit.

In this time of “mid-season” planning, it’s a good idea to determine how these tax changes impact the exact amount of money that will hit monthly budgets. Using the Knowledge Bureau’s Income Tax Estimator provides a quick and easy way to do “what if” scenarios.

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