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Tax Benefits When You Have Children

As nearly anyone with children will tell you, being a parent is a truly special and wonderful thing, even if the experience of raising kids can occasionally be a little bit taxing.

When it comes to paying your income taxes, however, having children offers multiple avenues to reduce your tax bill by taking advantage of kid-related credits and deductions. If you already have children, or you’re thinking of having kids, familiarize yourself with these ways to save on your income tax bill and free up funds for your family’s needs.

Medical expenses

Some of the costs you incur in getting pregnant and delivering a child can be claimed as medical expenses. Eligible costs include fertility-related procedures such as IVF treatments, the costs associated with a surrogate or donor, prescription drugs, pre- and post-natal treatments at a hospital, and medical equipment such as a baby breathing monitor, should you need one.

Adoption expenses

If you adopt, you can claim up to $18,210 per child in eligible costs related to the process, including travel costs, agency fees, court costs, and document translation costs.

Canada Child Benefit

The Canada Child Benefit provides a tax-free monthly payment to eligible parents and caregivers. Those who qualify could earn up to $6,400 per year for any child below the age of six, and $5,400 annually for kids aged six to 17. Benefits payments are partly based on parental income, and end when a child turns 18.

You can apply for the Canada Child Benefit as soon as your baby is born by making the application part of the birth registration process. Benefit applications can also be made through a CRA online account or by mail.

Childcare and activity expenses

If you pay a caregiver to look after your child while you work, run a business, attend school, or conduct funded research, you can deduct some of that cost from your taxable income. The annual deduction limit is $8,000 per eligible child under the age of seven, and $5,000 per eligible child aged seven to 16. The deduction covers the cost of before- and after-school care, individual caregivers, and day camps.

GST/HST credit

The goods and services tax/harmonized sales tax (GST/HST) credit is a tax-free quarterly payment that provides up to $560 per year for individuals and families earning low and modest incomes. Eligible recipients receive an additional annual amount of $147 for every child. You don’t need to do anything to apply for this credit— the CRA will automatically check your eligibility when you file your taxes.

Canada Education Savings Grant

Let the government help you save for your child’s post-secondary education by taking advantage of the Canada Education Savings Grant (CESG). The grant adds an extra 20 per cent on to your annual contribution to a Registered Education Savings Plan (RESP), up to a yearly maximum of $500 and a lifetime max of $7,200.

Earnings inside an RESP aren’t taxed until you take the money out. Since it’s for a student beneficiary, however, your child is likely to be in a low tax-bracket when you make the withdrawals.

It takes just over 14 years of contributions to get the most out of the grant, but you can catch up at any time by making a new contribution. The CESG is available until the end of the calendar year in which the beneficiary turns 17.

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