Families are constantly changing, whether it’s getting married, having a child, caring more for a parent, or sending a student to college.
The changes may also bring new tax credits and new procedures into your life. Tax experts offer some advice for families going through different periods of life.
Common-law union and marriage will change the amount of tax you pay
There are tax credits specifically for couples, including a non-refundable tax credit if you have a partner who earns less than you. Because it is non-refundable, this credit may not increase the amount of money you receive from the government, but it could reduce the amount of tax you owe.
Couples can pool their expenses
It’s possible to be strategic when pooling expenses for things like childcare, donations and medical expenses, says estate planner Cindy David. Sometimes, as with child care expenses, these expenses must be declared by the low-income partner. With respect to medical expenses, it may also be advantageous for the low-income spouse to report these expenses on their return because of the way the tax credit is calculated based on income.
Consider life insurance for your family
If you have dependents, several people could be affected if you lose your income, your ability to work or your life. Not only does life insurance protect your family in this scenario, but estate planner Cindy David says some plans allow you to prepay premiums. These advance payments are then invested in tax-sheltered accounts that exceed your RRSP or TFSA limits, and the growth can be passed on to your beneficiaries.
Opening an RESP is essential if you have children
Ms. David says Registered Education Savings Plans are a must for people with children. Earnings are tax-sheltered and the government provides a 20% grant for every dollar you contribute up to $2,500 per year. The account is flexible in terms of the types of education the funds can be used for. And if your child doesn’t go to college, you can keep the earnings tax-sheltered as if it were an additional tax-free savings account – you’ll only have to waive the 20% subsidy.
Your child’s unused tuition credits can be transferred to you
A student may not use all of their tuition tax credits, perhaps because they have not yet started working or earn very little income. If so, then Christine Van Cauwenberghe of IG Wealth Management said they can transfer a portion of the mandatory tuition or incidental fees to a parent, grandparent or supporting spouse up to a maximum of $5,000 less any income the student earned above the base. personal income tax credit of $14,398.
Students moving for post-secondary education can deduct moving expenses
If you moved at least 40 kilometers closer to an eligible post-secondary institution, you can deduct your moving expenses.
Dependents can include a wide variety of family members
The Canada Caregiver Credit is not just for people caring for children or aging parents. It can also be used for extended family members who depend on you for food, shelter and care, such as siblings, aunts and uncles, nieces and nephews, and children of a joint.
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