By Evelyn Jacks
Reprinted from The Toronto Star
August 22, 2011
Did you just drop a bundle on school supplies, and performance enhancing running shoes as you prepared for a new school year? Fortunately, financial relief may be only a tax return away. Just keep the right receipts and you’ll get a bigger tax refund come spring. In fact, if you take advantage of all the provisions below, depending on the criteria, you may save $800 plus per child this year.
Children’s Fitness Tax Credit
Claimable since 2007, this credit recognizes eligible expenses for sports and fitness activities taken by each child under age 16, up to a maximum of $500. (Parents of a disabled child under 18 get to claim more.) Some interesting activities qualify–sailing, bowling and golf lessons, for example, in addition to the more typical hockey and soccer.
In your pocket: You’ll save 15% of every dollar you fork out, up to the limits above. That’s a maximum of $75 for each healthy child. Since this is a non-refundable tax credit, it offsets federal taxes you otherwise pay. No benefit, in short, to those who pay no federal tax.
Children’s Arts Tax Credit [KINDERMUSIK QUALIFIES!]
New this year is a federal tax credit for costs of participation in artistic, cultural, recreational or developmental activities. It includes literary, visual and performing arts, music or language lessons, too. Costs of instruction, equipment, uniforms, facility rental and administration costs included in the registration or membership fees qualify.
Ontario Children’s Activity Tax Credit [KINDERMUSIK QUALIFIES!]
This credit was available on your Ontario Tax Credit Form in 2010 and is back this year. It lets you claim up to $500 paid for each eligible child in an eligible activity. (Double that amount if you spend at least $100 on an activity for a disabled child).
In your pocket: You get back 10% of all the money spent on eligible activities, or $50 more, per child, on top of the value of your federal credits. The good news about this one is it’s refundable–you’ll get it even if you don’t pay provincial taxes.
You may have enrolled your little ones in summer daycamp, while you work, but the “prescribed” activities may not qualify for the credits above. They may, instead, qualify for the deduction of for child-care expenses, which means you could get more bang for your buck. An increased Canada Child Tax Benefit is possible too. Child-care expenses must be claimed by the spouse who earns the lower income, with no benefit if one spouse is a stay-at-home parent, has a very low income, or non-qualifying income (such as Employment Insurance benefits, for example). Where an activity qualifies for both the deduction and the tax credits, it must be claimed as child-care expenses. The balance can be claimed via the tax credits.
In your pocket: Because this is a deduction, not a credit, claiming a child-care deduction will provide a larger marginal tax benefit, the higher your income. For example, at the top marginal tax rate in Ontario, you’ll get back close to half of your $500 costs, as opposed to a maximum benefit of $75.
Recover Refunds on Missed Claims
If you forgot to make any claims in the past, you can always request an adjustment to prior filed returns. There is a maximum 10-year period for most corrections. To tap the 2001 tax year make a request before Dec 31.
In your pocket: The sky’s the limit, depending on number of kids, activities, medical conditions, babysitters, and income level. Stash the refund in your children’s post-secondary education savings. Then, remind them often that with the right education, they’ll be financially set to enroll you in that luxury retirement residence (the one with the hot tub)!
Winnipeg tax expert and author Evelyn Jacks’ latest book is Essential Tax Facts. She is president of The Knowledge Bureau which offers professional development to tax and financial services advisers.