The Family Tax Cut


After a sad couple of weeks after the tragic events that took place in Ottawa (see my blogs that I wrote about these events here and here), I am happy to write about some good news for families in Durham. Our government made a pledge several years ago that once the country had weathered the global recession and was returning to balanced budgets, that we would offer significant tax relief for Canadian families with children. We know that seniors on fixed incomes and families with growing children are both sensitive to rising costs, so we have tried to offer some flexibility to these Canadians. Over the last few years we assisted seniors by introducing pension income splitting, increasing the Guaranteed Income Supplement and other benefits. (See table at bottom of post: Provisions for Canadian Seniors). Last week we unveiled a major package for Canadian families with children with the Family Tax Cut.

See: Government of Canada, Department of Finances: Helping Families Prosper

There are four pillars to this package to ensure that it offers relief to 100% of families with children under 18.

First, the Family Tax Cut introduces income splitting for families to help provide more flexibility for parents as they make decisions about how to juggle the challenges inherent in raising children and paying the bills. It will allow families to smooth out their combined tax treatment by permitting the transfer of up to $50,000 of taxable income from one spouse to another in a lower income tax bracket. The benefit from this splitting will be capped at a maximum benefit of $2,000. This makes tax treatment for families with children more equitable and by capping the benefit we have the fiscal room to do even more to ensure all families with children under 18 benefit.

The second pillar of the Family Tax Cut is a major enhancement to the Universal Child Care Benefit (UCCB). The UCCB is a popular measure introduced by our government that has provided families with $100 per month for each child under the age of six. We are now increasing this benefit to $160 per month, which will provide families with up to $1,920 per year for each child under the age of six. We know that this amount does not cover the costs of childcare, but it is designed to help all families rather than just a few. The Liberals promised a national childcare plan twice a decade ago and delivered nothing. More importantly, a one-size fits all solution from Ottawa does not meet the needs of all families, particularly those in rural or suburban areas like Durham. Some families have a grandparent or neighbour who can help with childcare, others may take advantage of flexible work arrangements, or use a licensed daycare centre. Many families will also decide to have a parent step out of the workforce for a few years or switch to a part-time role to help raise their children. All of these options are good ones if they meet the needs of the family. This is why we support the flexibility provided by the UCCB and why we are increasing the monthly payment.

The third pillar of the plan is to introduce a new benefit for children over the age of six. Following discussions with families, we recognized the need and we are expanding the UCCB to provide for a new benefit of up to $720 per year for children ages six through 17. These payments will take effect as of January 2015 and will begin to be reflected in monthly payments to recipients in July 2015. This new 6-17 child benefit will pick up when the 0-6 benefit ends to provide all families with additional flexibility while their children are in school.

Finally, the fourth pillar of the Family Tax Cut is an increase to the deductibility of child care expenses. The Child Care Expense Deduction (CCED) allows child care expenses incurred for employment or education purposes to be deducted from income for tax purposes. We are increasing the CCED by $1,000 for each child aged 7 through 16. This recognizes the rising costs facing families and this benefit is being made refundable to help benefit lower income families.

See: Government of Canada, Canada Revenue Agency: Child and Family Benefits

I am proud that our government is keeping its promise to provide tax relief for families. I am even prouder of the fact that we came up with a program designed to ensure that every single family with children under 18 will directly benefit. No two families are the same and no family should be excluded from benefits because of a one-size fits all program from Ottawa.


Here are some examples of how Canadian families will benefit from the new measures introduced by our Government:

  • The majority of the benefits flow to low-and-middle income families.
  • Families earning less than $30K will receive an average benefit of $1,218.
  • A single parent with two children earning $30,000 receives $1,524 per year.
  • A two income family with two kids where the mother earns $48K and the father earns $12K will receive a benefit of $1,186 – 36% of their federal tax bill.
  • A two earner couple making $48K and $12K with one kid will see their tax bill reduced by 25%.
  • A two income family with two kids with one parent making $96K and the second parent making $24K will benefit by $3,000.
  • A single parent making $50K with two kids will see $986 in relief and benefits.

 

To review what we have done in the last few years. Provisions for Canadian Seniors:

  • The first Income Splitting we introduced was Pension income splitting for seniors. It allowed eligible Canadians to split up to 50% of their eligible pension income with their spouse or common-law partner to reduce their overall tax burden. Over 1 million senior couples took advantage of this in 2012/13. I would note that Justin Trudeau has said he would eliminate this benefit.
  • We increased the Guaranteed Income Supplement (GIS) for the lowest income seniors by up to $600 annually for single seniors and $840 for couples. It is the highest percentage increase in 25 years and helps 680,000 seniors across Canada.
  • The Pension Income Tax credit maximum allowable amount was doubled to $2,000, and in 2012/13 was claimed by more than 4.5 million people
  • The Age Credit for Canadians 65 and older was increased by $2,000 and was claimed by almost 5 million seniors in 2012/13
  • In 2012, the Government implemented direct support for family members who are caregivers of infirm dependent relatives, through the Family Caregivers Tax Credit.
  • We rolled out the New Horizons for Seniors (NHSP) grant program to helps seniors to both benefit and contribute to the quality of life in their community. These grants have invested over $400 million into more than 13,000 projects including here in Durham.

Seniors have been a priority for our government. In fact, we introduced these measures early in our government and waited until the balanced budget period to offer this major tax relief to families. Government is about setting priorities and our priority is to manage the economy well so we can reduce the burden on seniors and families. It is not either/or.



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