Note to Readers: For 2014 and subsequent years, Budget 2015 introduces a change to the calculation of the Family Tax Cut to allow the unused tuition, textbook and education credits transferred from a spouse or common-law partner.
Additional changes to the Family Tax Cut were announced in Budget 2016 under Income Splitting Credit.
On October 30, 2014, Prime Minister Stephen Harper announced a new initiative to cut Canadian taxes and increase benefits for families. Measures to make this happen include:
A federal Canadian tax credit called the Family Tax Cut that will enable a higher-income spouse to transfer up to $50,000 of taxable income to their spouse in the lower tax bracket. The net result would be tax relief for couples with children under 18 years of age. This tax would be effective for the 2014 tax year. This type of income splitting has already helped seniors across the country and will now do the same for Canadian families.
The Universal Child Care Benefit will also be increased. For children under the age of 6, parents will receive up to $1,920 per child or $160 per month. This will come into effect on January 1, 2015.
For children aged 6 and older, the Universal Child Care Benefit (UCCB) will also give parents a $60 per month benefit or $720 per year per child.
The Child Care Expense Deduction will also increase by $1,000 to set the maximum at $8,000 for children under the age of 7, and to $5,000 for children aged 7 through 16. Additionally, it will increase from $10,000 to $11,000 for children eligible for the Disability Tax Credit.
In October, the government also announced that it intends to double the Children’s Fitness Tax Credit. This will apply to the 2014 tax year and beyond. It will increase to $1,000 per year. For the 2015 tax year and beyond it will be refundable
All of this will come into effect when families file their 2014 tax returns in the spring of 2015. They will start to receive regular payments under the new formula as of July 2015. The July payment will also include a lump sum benefit payout to cover January through June 2015.
The enhanced Universal Child Care Benefit (UCCB) will take the place of the existing Child Tax Credit from 2015 on.
What all of this means is that:
- All families with children will benefit to an average of $1,140 per family in 2015,
- Two-thirds of the overall benefit will go to low and middle-income families,
- The Family Tax Cut will eliminate or reduce the federal taxes of a one income family relative to a two income family with a similar overall income,
- These tax relief measures will benefit all Canadians with the proportionately greater benefit going to low, and middle-income families, and,
- Approximately $3,400 in the total tax reduction for 2014 for a two-income family has resulted from tax measures introduced by the federal government since 2006.
We look forward to implementing all of these Canadian tax benefits for our customers when the time comes for 2014 tax filings.