The Harper government delivers average annual tax savings of $1,140 for Canadian couples with kids. The additional disposable income should be a boon for financial advisors.
The media spin leading up to the federal government’s announcement regarding income-splitting was almost entirely negative
. However, upon closer inspection, the new rules are in fact a win for Canadian families with children under the age of 18.
Speaking with Aurèle Courcelles, Investors Group’s director of tax and estate planning Friday, WP got schooled on the nuts and bolts of the changes. Chief among them was the expansion of the Universal Child Care Benefit (UCCB) to include children aged six through 17 up to a maximum of $720, an increase in the UCCB for kids under the age of six from $100 to $160 per month and an increase in the Child Care Expense Deduction of $1,000 per year for children 16 and under. The expanded UCCB replaces the Child Family Tax Credit.
A critical component of the new rules is the $2,000 cap on the Family Tax Cut, which allows couples to transfer up to $50,000 of taxable income to the spouse in the lower tax bracket. Prior to Thursday’s release there was concern the changes would be most beneficial to couples with one-income families with a stay-at-home spouse. However, the cap ensures that this benefits low income Canadians equally.
At the end of the day Courcelles summed up the new income-splitting rules in one sentence: “It puts more disposable income in the hands of families.”
A perfect place for this additional disposable income is an RESP giving financial advisors another reason to give their clients with children under the age of 18 a call.
That’s very good news at week’s end.