On July 20, 2015, every Canadian with children will receive $60 a month per child, or have their benefit increased to $160 a month per child as a result of changes to the Universal Child Care Benefit program. Depending on whether or not you signed up for direct deposit with your Oakville personal taxes, you’ll receive a cheque in the mail or a deposit into your bank account. This refund covers January 2015 to July 2015.
You may be thinking: This is great! Extra money in my pocket! However, there are a few things you’ll want to remember:
a) The UCCB refunds are taxable as ordinary income for dual parents. For single parents, the refunds reduce the “Amount for eligible dependent” credit. In Ontario, these payments are taxed at a rate between 20.05% to 49.53% depending on your income level.
b) As part of the increased UCCB, the”Child Tax Credit” has been eliminated. This credit elimination will increase your Oakville personal taxes by $338.25 per child per year.
For an average working dual parent family, the impact will be as follows per child as follows in Ontario:
a) Increase to UCCB: $720.00 – $60.00 per month for 12 months
b) Taxes on UCCB: ($216.00) – Assume 30% tax rate
c)Loss of Child Tax Credit: ($338.25) – per year
Net impact per child each year: $165.25
In this example, you would benefit an extra $300.00 if you benefit from the $1,000 increase to the child care expense limit.
This example illustrates that Canadians will not fully benefit from the increased UCCB and will need to ensure they can cover the changes in their Oakville personal taxes as laid out above. Please contact me to determine the impact on your family and how I can assist you to ensure you do not receive a larger than expected tax bill for 2015.
William Khalilieh is a Chartered Professional Accountant, based in Oakville, Ontario, who provides practical tax and accounting solutions to individuals and their businesses in the Greater Toronto Area.