A Canadian parent’s guide to the 2024 tax season #CanadaFinance

The costs of raising kids can add up. At last count, a two-parent, middle-income household spends roughly $293,000 to raise a child from birth to age 17, according to Statistics Canada. To offset these costs, federal and provincial governments offer various tax credits and deductions specifically for parents that are worth considering, including some perks that are often overlooked, according to tax experts.

The key is figuring out which ones apply to your specific situation. “There’s a lot of benefits out there for families,” said Tyler Thielmann, president and CEO of Spring Financial. “Many are variable, depending on household income or the primary caregiver income.”

It’s up to taxpayers to do some research and keep track of their expenses throughout the year. “People tend to think that because they have children, they automatically have credits on their tax returns,” said Yannick Lemay, a tax specialist at H&R Block Canada. “That’s a myth. The credits are based on expenses you’ve incurred.”

Where to start

The first step, according to Stefanie Ricchio, CPA and tax expert for TurboTax Canada, is to prepare your taxes together if you’re married or in a common law relationship. “If you prepare them jointly, it will help you,” Ms. Ricchio said. Next, understand the most common tax credits and deductions, such as the Canada Child Benefit, a tax-free monthly payment to eligible families with children under 18.

Parents can claim tax deductions on child care expenses, which can help lower amounts owed or even boost your return. “This is a significant tax credit that you should be taking advantage of,” Ms. Ricchio said.

There are the obvious ones, such as daycare and babysitting costs, but don’t forget about day camps and sports, and private and boarding schools, which may be eligible depending on their programming mandates.

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Medical expenses

Medical expenses can be claimed as a non-refundable tax credit to reduce income tax payable and maximize your tax refund. This includes children’s medical expenses, such as orthodontist work (braces), glasses and eye exams. Tutoring expenses may be claimed, provided a medical practitioner certifies in writing that the service is needed, and it’s supplemental to the child’s primary education. Other therapy-related fees, such as reading services for a child with a severe learning disability or sign language interpretation services for a child with a speech or hearing impairment, may also be claimed.

Some medical expenses associated with having a baby can be claimed as well. “People may spring for a private room at the hospital, or get a double or a night nurse,” Mr. Thielmann said. He suggests looking into the Canada Revenue Agency’s list of authorized medical practitioners for each province to find child-related expenses.

Disability benefits

There’s also the child disability benefit, a tax-free monthly payment for a child under 18 who has a severe and prolonged physical or mental impairment.

“If you have a child with a learning disability and you received an assessment from a qualified medical practitioner that says your child would benefit from tutoring due to an underlying diagnosis, tutoring now becomes an eligible medical expense,” Ms. Ricchio said.

This can include physical impairments and mental disabilities such as ADHD and autism. The disability tax credit, which can apply to families if a child has an eligible diagnosis, can be transferred from the child to the parent and claimed on the parent’s tax return.

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RESP

While it’s not just for tax season, one long-term strategy that can benefit families is to open a Registered Education Savings Plan as soon as your child has a Social Insurance Number. Investment earnings within the RESP are not taxed until withdrawn, and withdrawals are taxed in the hands of the student.

Having an RESP also opens up pathways to other federal benefits, such as the Canada Learning Bond, in which a beneficiary receives $500 their first year of eligibility, then another $100 each year until the age of 15, for a total of $2,000. Similarly, the Canada Education Saving Grant gives eligible beneficiaries up to $500 each year until age 17, for a total of $7,200.

Two provinces offer additional RESP-related benefits. In B.C., beneficiaries may be eligible for an additional one-time grant of $1,200, through the British Columbia Training and Education Savings Grant. “This is commonly forgotten and you have to go and actually apply for it at the bank,” Mr. Thielmann said. In Quebec, beneficiaries may be eligible for the Québec Education Savings Incentive, with a lifetime maximum of $3,600.

Unique family dynamics

For those with other family dynamics, it’s worth researching online or consulting a tax expert to see which deductions or credits may apply. For example, single parents may be able to claim a child as an eligible dependent – “a significant non-refundable tax credit,” said Ms. Ricchio. Those in non-traditional caregiving roles may still qualify for tax credits and deductions, such as adoptive parents, who can claim eligible adoption-related costs (legal expenses, travel, and agency fees) up to $19,066 per child.

And, for those who are separated or divorced, Ms. Ricchio says it’s important to have a common law separation agreement that clearly states who will claim the children on the tax return and who will receive the Canada Child Benefit for that particular child. “We see quite often where people don’t have these items recorded in separation agreements and then the CRA does come and ask questions,” she said.