New Tax changes in Canada that affect parents

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1 April 2016

by Beverly Smith

The new Liberal government under PM Justin Trudeau has changed benefits from the earlier Conservative PM Harper regime. It is a bad news/good news story, but the weight may be towards good news.  Direct money paid to parents will actually increase and be less conditional. Taxes for many families will go down.

a. Taxes – those earning $45,282 or less still will pay 15% tax and tax rates will not change for those earning $90,564 -$140,388 (26%) or those earning $140,389-$200,000 (29%) However the middle earner household earning $45,283-$90,563 will see a drop in tax from 22% to 20.5%.  Those earning over $200,000 will pay more tax, from 29% up to 33%.

b. Income splitting that was permitted for a limited amount of money between spouses in households raising children under age 18 has been cancelled.

c. Child benefits paid directly to parents will increase. They were $160 per month for children under age 6 AND $60 a month for children 6-17. That universal benefit will be cancelled. The deduction for sports and arts enrolment will also be cancelled.  The child tax credit of $337 per child will also be eliminated. Those will be replaced by a Canada Child Benefit that promises to give 90% of households more money. The new benefit is tax free and based on household income. It will be as high as $6400 per child in a low income family (compared to $5825 from the Harper government) , $3245 per child in a household earning $90,000 (compared to $2,125 from the Harper government) and only  reduced to $1695 per child in a household earning $140,000 (compared to $1500 from the Harper government) and eliminated entirely only for those earning over $200,000. (where the Harper government still allotted $1425 per child)

d. There will continue to be favourite treatment for those using 3rd party daycare.  The child care expense deduction will increase to $8,000 per year for children under age 6 and $5,000 a year for those aged 7-16 and $11,000 a year for a disabled child. Parents not using 3rd party care do not get this deduction or any recognition of their costs.

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