This is a subject that has come up often in our facebook group – here’s a great guest post by Corey that really helps to clear up the confusion!
There is so much confusion on the changes to the Universal Child Care Benefit and Child Tax Credit that I hope this post helps people understand.
I will start with explanations of these terms:
– Universal Child Care Benefit (UCCB): This is a monthly benefit meant to help parents pay for child care. If you have children under 6 years old then you would have been receiving $100 per month per child under 6 on the 20th of the month. This is increasing by $60 per child per month for every child. Children under 6 will receive $160 and children 6-18 years old will receive $60 per month.
– Child Tax Credit (CTC): This is the amount you claim on your taxes on line 367. It gives you a federal tax credit of $338 (as of the 2013 tax year) on your taxes. This is being eliminated in 2015. This is a non refundable tax credit, which is used to decrease the amount of federal tax you owe. It does NOT give you $338 back at tax time. It is an amount that is used to bring your federal tax payable down
– Canada Child Tax Benefit (CCTB): This is the amount you are paid based on your income on the 20th of the month. This is NOT changing.
Here is a scenario: Jessica has 2 children, Josh is 2 and Amy is 8. She currently receives $589 for CCTB and $100 for UCCB for Josh
every month on the 20th. At tax time she claims 2 children on line 367 which reduces her tax owing by $676 on her tax return.
The new UCCB amounts go into affect in January 2015 but the payments will not start until July 20th, 2015. On July 20th in the above scenario Jessica will receive back pay from January to June 2015 in the amount of $720 + the new UCCB payment amount for July of $220. So, on July 20th, 2015 Jessica will receive a total cheque of $940 which will catch her up on the new UCCB amount. On August 20th she will
receive $220, which is her new UCCB monthly amount, up from $100 she was getting in 2014. She still receives the payment from CCTB in the amount of $589.
So, with these changes there is no way that, if you have children, you will not come out ahead. Everybody, no matter what your income is, will be getting $60 more per child, per month. They are NOT taking away, or reducing any monthly payments from you. Your CCTB remains the same, plus you get $60 more per child, per month. You may have slightly more tax withheld on your paycheque, however it would amount to less than $30/month/child (and remember – you are getting an extra $60/month/child)
So at tax time for 2015, we will not be able to claim the $338 per child, but I will have to claim the income on my UCCB? So while we get the extra $60 per child right now, we in fact will be taxed on it and need to claim it on our income taxes. Meaning if you are in a certain bracket, you may now be moved into the next bracket, and you now can not claim the $338. I would rather have the reduction in my taxes, then claim the crappy extra $60 per kid. This will only help the people who do not work as they do not have income to claim.
If you are ‘moved into the next bracket’, only income above that threshold is taxed at that percentage. In Manitoba, for instance, even at the highest bracket (income above about $135,000/year), income at the top bracket is taxed at around 46% – so you will still come out ahead with the increased UCCB.
I agree with Rachel. I guess the person writing this article has a perspective but I still believe that this new change will not help us working middle of the road families.
I think the person writing the article came at it from the perspective of looking at the numbers rather than at their politics.
In Canada, when you move into the next income tax bracket, only income above that threshold is taxed at the higher rate. So, if you earn one dollar over the threshold, only that dollar is taxed at the higher rate. You should never take home less money because you got a raise, unless the person doing payroll at your company screws up – and even then, it will be rectified when you file your tax return.
In this case, individuals will receive an extra $720/year/child in taxable income. Using Manitoba, as an example, the highest combined federal and provincial tax bracket is 46.4%, for individuals making a little over $135,000/year (for the 2013 tax year, that income threshold will be higher for the 2014 tax year). So, for that person making over $135,000/year, their tax bill on that extra UCCB income will be $334.08. That’s still more money in your pocket than what your deduction was – and again, that figure is only for people making over $135,000/year – I’m pretty sure that $60/month is pretty much a rounding error in their budget at that point, so the fact that they pretty much break even on it doesn’t affect them.
For those of us who are “middle of the road” families, where we don’t have individuals making over that amount per year, we end up even farther ahead mathematically. How far ahead depends on where within the Federal and Provincial tax brackets you fall, but you’re ahead nonetheless. The only argument you could make would be that you think that having less money in your pocket, and more money in the Government’s coffers is a good thing, but I don’t think you’ll find many who agree with you there.
I find that they say the money is for the children, however they will not issue it in the child’s sin which nowadays each child is registered for one. As my wife and me put the UCCB and CTB in to RESP’s for our children the extra $720 a year will cost use at tax time $250.00 per child. (Calculation done as a middle tax bracket living in manitoba). It is also easy to spend $60 a month but at tax time the $250 that you owe is a little harder to come up with.
So why not put $21 from each UCCB cheque aside and save that for tax time, and invest the rest? You’re still coming out ahead from where you are now. You can easily set up a savings account to automatically draft that from your account on the same day the investments get taken, so no worry in accidentally spending that money.
The BIG problem as I see it is the fact that the Child Tax Credit STOPPED on Jan 1, 2015………….so my paycheque amt decreased due to the loss of the child tax credit.
BUT I don’t see any money from the government until July 2015.
For alot of people – me included – that is a hardship!! I have a hard enough time making my budget work each month – without having less on my paycheque and waiting 7 months to get the money from the government!!
That’s a very valid point – I understand their politics behind wanting to give everybody a big cheque a couple months before the election, however that part was very poorly thought out from the perspective of an everyday Canadian.
I have a 9 yr old my tax rate is 22% I will be a head a whopping $18.66 per month. The Cons can shove their tax breaks for stronger families BS.
Personally I’d be just fine being ahead almost $225/year – although if you don’t want that money, you can always write a cheque to the Receiver General of Canada and give it back to the government, who I am guessing you think can spend your money better than you can.
Or, take that money, invest it into a good mutual fund that averages, say, 8%/year (even a basic index fund will beat that) under a RESP for your child, and when he/she turns 18 you will have almost $3,000 for their education, not accounting for any match that you might qualify for. As of this year, U-1 at the UofM cost $4,500/year – so looking that far in the future, this tax break you want shoved could pay for at least a semester of tuition, if not more. Me, I’ll take the tuition paid for, thanks.
Actually I lose $110 over all.ALMOST ALL OF IT GOES BACK AS INCOME TAX.
Not sure what country you’re living in, the top income tax bracket in Manitoba only has you paying tax (Federal + Provincial combined) at 46.4% on every dollar you as an individual earn over $135,000/year. So, assuming you earn that much, on that $720/year in extra income you earn (per child), your tax burden is $334.08, meaning you keep $385.92 in your pocket.
The corresponding non-refundable tax credit that is being eliminated reduced your federal tax by less than this amount. So, you’re getting more money throughout the year than you would have saved at tax time – even without considering the opportunity cost of that money being held by the Government, you end out ahead with this change.
Please, show me the math that you used. Show me where I’m wrong on this – because every time I run the numbers, I end up with a net benefit to parents.
Greg I dont think you are getting it. We claim our kids on our cheques each payday so it averages out to almost 50 dollars more a pay cheque for one kid. They took that away now so I make 100 less a month and am now only getting 60 back? And six months after they lowered my income! Makes no sense. It would have been a real help if they kept the tax credit and added the child care benefit. I as a single income parent am loosing money! No benefit here 🙁
You really need a new payroll person at your job, as they pretty much don’t know what they are doing if you are losing $100/month for one child. The deduction for an eligible dependent at line 305 hasn’t changed, the only deduction that has changed is the amount for children at line 367. This credit works out to around $335/year in a reduction on your Federal income tax payable. If a loss of a $335/year credit means your pay is $100/month less, either you only work about 3 months a year (which I’m assuming is not the case), or somebody needs to learn how to do long division. Losing around $100/month sounds more like they aren’t giving you the credit for an eligible dependent as well as the amount for children, in which case they are applying the changes incorrectly.
The math doesn’t lie – even if you make over $135,000 per year, you make more money off the increased UCCB after taxes than you lose in that deduction. There is plenty to be said about the other tax announcements that were made as part of the Fall economic update and a good debate can be had about the net benefit of something like income splitting, however looking solely at the UCCB/Child Tax Credit changes, if the goal is more money in the hands of parents, this meets that goal.
Thanks for the insult Greg. I am the payroll person and I filled out the Payroll tax form just as I did the year before less line 2 and line 8 that they took away this year which is $2255 and $11327 . That made a difference this year in the amount of taxes taken off. It used to be less then $100 taken off in taxes a paycheck and now it is over $150. Also you are taxed on UCCB as it counts as income. So that 60 bucks is now 48 bucks. Like you said the numbers don’t lie. Are you a certified accountant? If you are then advice on why I am being screwed over would be great!
Jen, please look at the comment I made below regarding this. You should not be paying $100 more per month because of them taking away the child amount on your tax return.
Not sure why you didn’t put in line 8, the only difference between the 2014 and 2015 wording of that line is it changed to “cannot claim the caregiver amount” vs. “did not claim the caregiver amount”, when talking about the increased income threshold that the dependent can earn. The only reason that you should not have included line 8 is if the individual no longer qualifies as an eligible dependent, however the rules surrounding that have not changed from 2014 to 2015, so you can’t really blame that on the government of the day.
Jen, the child amount on the payroll form you filled out has been replace by the caregiver amount for children under 18. In 2014 the credit was $2255 and for 2015 it is $2093 per child. So, your tax form should not have changed by that much. Mostly since the personal amount went from $11,138 to $11,327. I’m not sure why you are getting $50 more per cheque taken off but it is not because they have taken away the child amount, because they just named it something else on the tax form.
2015:
http://www.cra-arc.gc.ca/E/pbg/tf/td1/td1-15e.pdf
2014:
http://www.hr.gov.nt.ca/sites/default/files/td1-14e.pdf
Now looking at the wording, for line 2 is for “infirm” children. So I guess you will miss out on that credit. But, line 8 still applies if you can claim eligible dependant for the tax year. Nobody took that away. I’m thinking maybe that’s why you are getting such a large discrepancy.