Whether you’re raising one child, multiple children, or welcoming a newborn into the world, there’s a universal truth that all parents learn pretty fast: Your expenses climb and climb and climb. And climb!
Sometimes, it can be hard to make ends meet. Even if you’re doing well financially, as a parent you want to make every dollar count, because you also carry a responsibility to manage your money wisely, so that you can invest in the long-term wellbeing of your kids. This includes saving for their education, rainy days, and even your own retirement—so they don’t have to support you later in life.
It’s no wonder the words “tax time” annually send shivers down the spines of parents from coast to coast. If you know you’re going to owe, the thought of shelling out more of your hard-earned money can be incredibly stressful. And even if you know you’ll be getting a refund, you’re probably stressed about how to maximize the amount.
The good news is this: the Canada Revenue Agency offers several different ways for parents in all situations to lower their tax burden, reduce the amounts they owe, and maximize their potential refunds.
Whether you’re filing taxes with a new baby, a child, or several children, here are a few essential tax tips every Canadian parent should know.
Put extra money in your pocket with the Canada Child Benefit (CCB)
There are a lot of reasons to make sure you file your taxes each year (for starters, it’s the law) but if you’re a parent the Canada Child Benefit is a great motivator.
The Canada Child Benefit is a monthly, tax-free payment given to parents for each child under 18 years of age they have. It’s partly based on your income reported in your tax return of the previous year, so you must keep doing your taxes to be eligible.
Depending on your family income, the CCB amount can be an extra few hundred dollars in your pocket each month. The maximum amounts change each year, so be sure to check the official CCB website for current estimates.
Claim your childcare expenses
The number one way to reduce the amount of taxes you’ll owe, or maximize your refund, is to claim the amount you spent on childcare. From daycare to nursery schools to boarding schools, make sure you save every single receipt.
Currently, you can claim up to $8,000 for each child under the age of 7 and up to $5,000 for each child between the ages of 7 and 16. If one of your children qualifies for the disability tax credit, you can claim up to $11,000 in childcare expenses.
By claiming these expenses, you could be entitled to money back, which will either lower the amount owing on your tax return or increase the refund you’ll receive.
For more information on claiming childcare expenses, click here.
New parent? Claim your medical expenses
If you had a baby since the last time you filed your taxes, you can claim some of the costs you might have incurred. For instance, if you invested in pre-natal care with a nurse or upgraded to a private room at the hospital, you can claim these expenses in your tax return.
Additionally, if you went through fertility treatments—such as an IUI or IVF—you can claim those expenses as well on your tax return. Many people don’t realize these are expenses you can claim, so if you discarded your receipts for these treatments try contacting your fertility specialist’s office and asking if they can send you another copy.
Use your kid’s tuition to your advantage
If you’re the parent of an older child who’s in post-secondary school, you might be able to take advantage of their unused tuition amounts. Tuition amounts are intended to help parents and students alike manage the rising cost of post-secondary education.
Regardless of who is paying the tuition, your child (the student) must claim their tuition fees on their own tax return first, but if their income is too low, they won’t be able to claim the full tuition amount. In this case, the student can transfer the unused tuition amount to a parent, grandparent, spouse, or common-law partner.
If you’re a parent who is paying for their child’s tuition and/or providing room and board, asking them to transfer their unused tuition amounts to you is a smart way to lower your tax burden.
Tax tips for single parents
All of the above tips apply to all parents, whether they’re together, separated, or single. There are some special considerations, however, single parents should be aware of.
Claiming your child as a dependent
If you’re a single parent, you might be eligible to claim your child as a dependent. You can only claim one dependent at a time, so if you have multiple children you can only claim one as a dependent. Doing this will reduce what you owe to the CRA. To be eligible, the child must be 18 years or younger and live in the same residence as you.
Claiming your child as a dependent if you’re separated
If you’re separated from your spouse and share custody, only one of you can claim an eligible child as a dependent. If you share custody of two eligible children, each parent can claim one as a dependent. If either parent pays child support, that parent is ineligible to claim a child as a dependent.
Claiming the Canada Child Benefit when you share custody
If you’re a single parent who doesn’t share custody, you can receive the full amount of the Canada Child Benefit. In a shared custody situation, it’s still possible to receive the benefit, but you might have to split the benefit so that each parent receives 50%.
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