Family Tax Credit
The government introduced a new non-refundable tax credit resulting in savings of up to $2,000 for couples with children under 18, starting in 2014. To calculate the credit, the spouses first calculate the combined tax they would normally pay. They then calculate the combined tax they would pay as if the higher income spouse had notionally transferred one half of the difference in taxable incomes (max $50,000) to the lower income spouse. The difference in taxes payable under the two calculations will equal the Family Tax Cut (to a max credit of $2,000).
Note: the income splitting is “notional” in that it is not actually transferred to the tax return of the lower income spouse. As a result there would be no provincial tax savings unless the province introduces a similar credit.
Universal Child Care Benefit
The UCCB will increase to $160 per month (from $100 per month) for each child under age six. There is also a new benefit of $60 per month for children aged 6 through 17. The changes will tax effect starting January 2015 and will be reflected in monthly payments starting in July 2015.
At the same time, the existing Child Tax Credit available to individuals with children under 18 will be eliminated. The Child Tax Credit is a non-refundable tax credit based on a fixed amount per child under 18 ($2,255 per child in 2014).