02/03/2015 12:58 EST | Updated 04/05/2015 05:59 EDT

Looking For a Tax Break? Consider Borrowing a Child or Two

Most of the recent tax changes introduced by the government are meant to help families with children

There was a recent posting on Kijiji by an affluent couple looking for a 17-year-old to live with them for the year so they could claim the new Family Tax Cut. It looked like a pretty sweet offer that included their own room and $500 a month. Though I doubt that the ad was really serious, it showed that people can come up with some crazy ideas when it comes to claiming a tax break -- even if it is not exactly legal. And since parents seem to be getting all the recent tax breaks, borrowing a kid sounds like a good idea.

Becoming a parent is one of the most exciting moments in life. Unfortunately, it doesn't come with a finite price tag. The Canadian Institute of Child Health estimates that the cost of raising a child to 18 years of age, in lone-child families, is $304,600. Suffice it to say, parenthood is very expensive. But some of the new tax changes will bring a little relief to parents.

If you have one or two children and your household income is less than $116,000, you should be receiving the Canada Child Tax Benefit every month. The CCTB is non-taxable and is meant to help lower income families with the costs of raising a child. In 2006, the government introduced the Universal Child Care Benefit (UCCB) for children under six. Parents received $100 per month until a child turned six to help with the cost of child care. The amount was the same for everyone no matter a family's income. However, it is taxable. So parents now found themselves with an additional $1,200 in income at the end of the year and once a child turned six, the monthly benefit stopped.

Now the federal government is expanding the UCCB to include more kids and pay out more money starting in January 2015. The new enhanced UCCB features two tiers. Children up to six years old will receive $160 per month or $1,920 for the year. Once they turn six, parents will receive $60 per month or $720 per year until the child turns 18. If you are a parent, it can make you excited about your taxes. However, it is not being paid out as part of your tax refund. Parents will have to wait until July 2015 before they see the enhancements. The government will pay out a lump sum for the first six months of 2015 and then parents will receive the new amounts monthly. There was no explanation for the lump sum payment but when there are people campaigning at your door this summer, you can make your own conclusions.

While most parents were excited about the enhanced UCCB, there may not have noticed that the amount for children under 18 will be eliminated from the tax return after 2014. This was a non-refundable tax credit that resulted in about $338 in tax savings. The enhanced UCCB is meant to replace this credit and it is more generous in most cases. It also benefits lower income families who may not have had enough income to claim the amount for children under 18. Everyone will receive get the new UCCB, but remember, it is taxable so it will be included in your income at the end of the year. If you are a single parent, you can designate the UCCB amount to the child you are claiming the amount for eligible dependant to help lower your tax liability.

You will not automatically receive the new UCCB amounts if you haven't registered your child with the Canada Revenue Agency. If you did not previously qualify for child benefits, you may not have completed a RC66 Canada Child Benefits Application Form. The government doesn't give away money that often so make sure you complete the paper work so you can get the additional payments. And unlike the CCTB, the enhanced UCCB does not rely on filing a tax return every year to qualify because it is not based on income. You just need to complete the RC66 Form.

Single parents with primary custody will receive the enhanced UCCB payments. Separated parents with shared custody will be able to split their payments so they each receive an equal share. You need to make sure the CRA knows you want to split your benefits so it actually happens.

Though raising little ones is expensive, I think every parent can attest to kids remaining a big expense once they are over the age of six. Now all parents will be able to reap the benefits. As I tell my clients, the extra money every month may not change your life, but you probably wouldn't step over it if it was lying on the ground, so it's a wise move to apply.


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