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Tax Time - Family Edition

Submitted by admin on Thu, 04/02/2015 - 12:12
Taxes
Family
Credits
Deductions
Spring
Spring is finally here, at least according to the calendar and as the temperature begins to rise and the snow begins to melt it’s time to start thinking about that other season that signals the transition from one ‘state’ to another.  I am, of course, referring to Tax Season.
Granted, it’s not as celebrated an event as the arrival of spring, but if you are a family in Canada, Tax Season is an opportunity for you to receive a little credit; tax credit to be exact, for the enriched life you lived in 2014.  Before filing your return, here are a few of the more notable deductions and credits that may benefit you and your family.
 
First, the Child Care Expense Deduction reduces your taxable income by the amounts paid for… you guessed it, child care expenses.  You can claim up to $7,000.00, thus reducing your taxable income by as much as $7,000.00.
 
If your children were enrolled in a physical activity, you can claim a credit of up to $1,000.00 per child for registration or membership fees in a prescribed program under the Children’s Fitness Amount.
 
Then there’s the Children’s Arts Amount, which works the same way as the Children’s Fitness Amount, only for registration or membership fees paid for a prescribed program which contributes to creative skills, and or cultural and artistic activity.  You can claim a credit of up to $500.00 per child for the Children’s Arts Amount.
 
Finally, there is the brand new Family Tax Credit, which will allow you to basically share your income with your spouse or common law partner.  This tax credit is only useful if you or your spouse or common law partner are in different tax brackets.  If so, the individual with the higher income will be able to shift some of that income over to the other person’s tax return and pay tax at a lower rate.  So, if you and your significant other are both in the same tax bracket, this won’t do much good for you; however, if you are in different tax brackets you will be able to move as much as $50,000.00 to the other person for a maximum tax reduction of $2,000.00.  Remember, this is only useful when shifting income from a higher marginal tax rate to a lower one; for example: If Susan has $50,000.00 of taxable income and her husband Ted has $40,000.00 of taxable income, Susan can shift $3,953.00 to Ted’s income tax return, increasing his taxable income to $43,953.00.  Any amount above this would be taxed at the same rate whether it be on Susan’s tax return or on Ted’s since they would be in the same tax bracket.

Currently, the Federal Marginal Tax rates are as follows:
Up to $43,953.00 is taxed at 15%,
The amount between $43,953.00 and $87,907.00 is taxed at 22%,
Between $87,907.00 and $136,270.00 is taxed at 26%,
Everything above $136,270.00 is taxed at 29%
 
Having children can be expensive; by taking advantage of the deductions and credits available you can make things just a little more affordable.  As with anything else regarding your tax return, you can’t claim it if you can’t prove it, so keep all your receipts.  Do yourself a favour for next year; get a binder to start collecting all your tax and financial papers in.  Keeping all your information together in one place will make life, not just tax time a lot easier to handle and a lot less like going to the dentist to have a root canal without anesthetic .
 

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