Are your clients with children making the most of these tax breaks?

The government has eliminated certain tax deductions for households, but there are still some left on the table

Are your clients with children making the most of these tax breaks?

For parents in the average Canadian household, things may feel tougher from a tax perspective. Tax deductions for arts, fitness, and textbooks have been scrapped, as well as the income-splitting family tax cut. But even with these tax breaks gone, Canadian parents may still have an opportunity to minimize their liability through some often-overlooked deductions.

Parents with children under 16 years old may qualify for the federal government’s Child Care Expenses Deduction. In two-parent households, the deduction would only apply if the couple have an earned income of at least $11,635 in the 2017 tax year, and only the lower-earning parent would qualify, according to CTV News.

The deduction is capped at $8,000 for each child aged six and under and $5,000 for those between seven and 16 years old. In general, the total Child Care Expenses Deduction a household can avail of is limited to two thirds of the lower-income spouse or partner’s earned income. According to some experts, there are some child-care expenses that parents may not realize could be claimed under the deduction.

“One thing that is often missed is summer camp,” Jamie Golombek, CIBC’s managing director of tax and estate planning, told CTV News. “There are camps … for young kids that have a sufficient degree of child care that the cost qualifies for the child-care deduction.”

Another claimable expense, according to EY Tax Services associate partner Maureen De Lisser, is payment made to grandparents who care for the children. But the amount has to be reasonable for the situation, and the potential tax impact of babysitting income on the grandparents’ income-tested benefits also have to be examined.

A self-employed working parent may also consider paying a salary to one who primarily stays at home, said Lorn Kutner, a tax consultant with Toronto-based Northwood Family Office. If the stay-at-home spouse can do something that would warrant and justify a reasonable salary, that could help them meet the minimum earned-income requirement for the deduction.

Parents with children over 16 years old may not qualify for the Child Care Expense Deduction, but they may be able to take advantage of Tuition Tax Credits. Assuming their child is enrolled in post-secondary level courses at an accredited Canadian institution, the child can transfer up to $5,000 worth of unused tuition credits — calculated by adding together eligible tuition fees and multiplying the amount by the lowest federal tax-rate percentage.

“If you are helping your kids with tuition, you may want to tell them that unless you transfer the credit to me, I’m not going to help you anymore,” Golombek said. “That usually gets the child to sign it over.”