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| *Ostroff, Fair and Company>>>Canada Taxes |
How do dependents affect my taxable income? (In Canada)? |
I live in Saskatchewan and my wife and I will have our first child in January of 2007 There are areas that will be of interest to you: 1) Universal Child Care beneift at $100 per month. This is taxable and should be reported as income on your T1 tax return. You will get it together with your Child Tax Benefit. 3) You should open a bank account (in trust) for your child and put alll the child tax benefits in it. In that way, the interest from that bank account (T5 from the bank) is taxable in his hand, not yours. 2) You or your wife may be able to apply for maternity or paternity benefit up to one year as part of your employment insurance program. However, if your employment is not "insurable" (ie, you run a business or are self employed), you are out of luck. 3) While there is no tax credit for your child as a dependent (line 305), you can claim his medical expenses on line 330, if your total expenses for your whole family is more than 3% of your income. That include his presciptions, dental expenses, glasses (later when he grows up), but NOT baby formulas, car seats, baby strollers, diapers and the like. 4) Consider opening a Registered Education Savings Plan for your child early in his years. For every $100 you contribute towards it, the Government will contribution $20 towards his university/college education or post secondary job training program, until his is 16 years of age. The fund is transferrable to his younger brother or sister (or to your RRSP) if he does not go to College later. 5) Child care expenses, including after school care, day care, and summer camp, are deductible against the lower income of you or your spouse. Watch out if you use Grand Pa or Grand Mom as recipients of your child care expenses - it may affect their old age security pension. 6) You may get additional quarterly GST credit, if your family is eligible. Some provinces such as Quebec and Ontario has additional PST credit in your tax return. Source(s): from my experience as accountant |
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