On November 25, 2021, the Minister of Finance, Éric Girard, presented an Update on Quebec’s Economic and Financial Situation. Below are the tax highlights of this update, which introduces targeted fiscal measures, including an enhancement of the refundable tax credit for child care expenses.
1. ENHANCEMENT OF THE REFUNDABLE TAX CREDIT FOR CHILD CARE EXPENSES
Increases in the rates of the refundable tax credit
As of the 2021 taxation year, the tax credit rates are increased to provide more generous tax assistance, as shown in the table below.
The tax savings resulting from this new measure are significant for those with a family net income of $101,490 or more. Before the increase in the credit rates, a plateau existed for those with a family net income between $101,490 and $145,700 with a rate of 57%. The rate was then gradually reduced to 26% at a family net income of $165,030 or more. With the introduction of these changes, this plateau and reduction of the rate disappear, and those with a family net income of $101,490 or more will benefit from the enhanced credit rate of 67%. This rate increase combined with the increased amount of qualifying child care expenses for certain children ($10,400 per year - see below) can result in tax savings reaching up to $4,381 per child and per year.
Increase in the rates of the refundable tax credit for child care expenses –
Current rates and enhanced rates for 2021
(dollars, unless otherwise indicated)
57% to 26%
(1) In the current table, a plateau exists between $101,490 and $145,700 with a rate of 57%. The rate is then gradually reduced to 26% at an income of $165,030 or more.
Increase in the annual limits applicable to child care expenses for certain children
The limit applicable to child care expenses paid in respect of a child who is under 7 years of age at the end of a year and the limit on child care expenses paid in respect of a child with a severe and prolonged impairment in mental or physical functions are, effective for the 2021 taxation year, increased from $9,950 to $10,400 and from $13,615 to $14,230 respectively. The amount of $10,400 is equivalent to a daily rate of $40 for a child attending daycare full-time, or 260 days/year.
2. IMPLEMENTATION OF THE REFUNDABLE TAX CREDIT GRANTING AN EXCEPTIONAL ALLOWANCE TO MITIGATE THE COST OF LIVING INCREASE
An eligible individual may receive, for the 2021 taxation year, under the refundable tax credit granting an exceptional allowance, a one-time lump-sum financial assistance, consisting of an amount of $200 per adult and an additional amount of $75 for persons living alone, if the individual is entitled to receive the refundable solidarity tax credit during the payment period beginning July 1, 2021, and ending June 30, 2022 (determined based on the 2020 reference year).
In this regard, it should be noted that the refundable solidarity tax credit is granted to low and middle-income households.
An individual who is eligible for the refundable tax credit granting an exceptional allowance will receive the amount of the one-time tax assistance as of January 24, 2022, without having to apply for it. No payment of this tax credit will be made to an individual who files an income tax return for the 2020 taxation year after December 31, 2021.
3. ENHANCEMENT OF THE REFUNDABLE TAX CREDIT FOR SENIOR ASSISTANCE
The maximum amount of the refundable tax credit for senior assistance will rise from $209 to $400 per senior aged 70 or older starting in 2021.
Subsequent to this enhancement, seniors aged 70 or older will be entitled to benefit from all or part of this tax credit if their family income does not exceed:
The refundable senior assistance tax credit remains reducible based on family income when the family income reaches $23,575. More specifically, for 2021, a single person will receive the maximum amount offered, $400, up to a family income of $23,575, while a couple in which both spouses are 70 years of age or older will receive a maximum of $800 up to a family income of $38,340.
As a result of the second and third measures discussed in this document, a senior living alone could benefit from an additional amount of $675.