An RESP is a trust arrangement that earns tax-free income to be used to fund the cost of a child or grandchild’s post-secondary education. Contributions to an RESP are not deductible for tax purposes and withdrawals of capital from the RESP are not taxed. The beneficiary is taxed on the accumulated income portion when withdrawn from the RESP for the purpose of funding their post-secondary education. While at school, the child or grandchild tends to have relatively low sources of other income, and as a result, the income is usually taxed at lower rates (if at all).
For RESP contributions in 2022:
If the beneficiary of the RESP decides not to attend post-secondary education, they will be taxed on the accumulated income in the plan at their marginal tax rate at the time, plus an additional 20 per cent and the CESG must be returned to the government. However, the capital contributed to the plan may be withdrawn tax-free.
The CESG can be shared with a sibling who is attending post-secondary education if they have grant room in their RESP, otherwise the grant must be returned to the government.
The maximum amounts deductible for child-care expenses are $11,000 for a disabled child, $8,000 for children under age seven, and $5,000 for other eligible children (generally, children aged 16 and under). In most cases, the spouse with the lower net income must claim the child-care expenses against his or her earned income.
The Government merged the Universal Child Care Benefit (“UCCB”) and Canada Child Tax Credit (“CCTB”) into a new Canada Child Benefit (“CCB”). The CCB is a tax-free payment based solely on the family’s income from the previous year. The program provides parents with monthly benefits of up to $569.42 with an additional $300 per child for July and October 2021 ($7,433 annually) for children aged six and under if 2019 family net income is $120,000 or less and up to $480.42 ($5,765 annually) for children aged six to 17.
However, if the family net income in 2019 is over $120,000 then the additional amount per child for July and October 2021 is $150 per child instead of $300.
The CCB is gradually clawed back for families making over $32,028 and fully eliminated for families making over $167,810 annually.
The application for the CCB can be made online through the CRA “My Account” when you complete your child’s provincial birth registration form or by completing Form RC66, Canada Child Benefits Application. More information can be found at here.
The Registered Disability Savings Plan ("RDSP") is a savings plan that is intended to help parents and others save for the long-term financial security of a person who is eligible for the Disability Tax Credit.
For 2016 and subsequent tax years, the Government implemented a non-refundable Home Accessibility Tax Credit.
The tax credit is available for eligible expenses incurred in making a home more accessible to individuals aged 65 or older or to individuals who are disabled or infirm.
Either the individual who incurred the expenses or the individual for whom the expenses are made can claim the tax credit. The individual who incurred the expenses can only claim the tax credit in respect of expenses incurred for his or her spouse or common-law partner, or for disabled or infirm dependants.
You can claim up to $10,000 in eligible expenses under the Home Accessibility Tax Credit, resulting in a non-refundable tax credit worth up to $1,500. Expenses eligible for the claim must be permanent and non-routine renovations to the home. The alterations must allow the individual for whom the expenses were incurred to be mobile within the home and/or reduce the risk of harm to the individual within the home.
You can claim an amount for eligible adoption expenses related to the adoption of a child who is under the age of 18. The maximum claim is $16,729 per child and must be included in the tax return for the year that includes the end of the adoption period.
Ontario offers support to eligible residents participating in fertility treatments (all residents of Ontario with valid OHIP). The following treatments and eligibility requirements include:
The Infirm Dependent tax credit, the Caregiver tax credit and the Family Caregiver tax credit have been replaced by a new 15 per cent non-refundable Canada Caregiver Credit (“CCC”). The amount in respect of which the CCC is calculated is $7,348 and may be claimed for the care of an infirm dependent relative. The credit amount is phased out when the net income of a dependent exceeds $24,361.
In 2019, the province of Ontario introduced the Ontario Childcare Access and Relief From Expenses (CARE) tax credit for low- and moderate-income families that pay childcare expenses. The CARE is a refundable tax credit that is only available to families with household income under $150,000.
The CARE tax credit is in addition to the existing Child Care Expense Deduction. Families could receive up to $6,000 per child under the age of seven plus a top-up of up to $1,200 for 2021, up to $3,750 per child between the ages of seven and 16 plus a top-up of up to $750 for 2021, and up to $8,250 per child with a severe disability plus a top-up of up to $1,650 for 2021.
For 2019 and subsequent taxation years, the Working Income Tax Benefit is replaced by the Canada Workers Benefit (“CWB”) which is a federal refundable tax credit. For 2021, the amount of the CWB will be computed as 27 per cent of earned income over $3,000, to a maximum credit of $1,395 for single individuals without children and $2,403 for families (couples and single parents).
The maximum credit is reduced by 15 per cent of adjusted net income over $22,944 for single individuals without children and $26,177 for families.
Individuals who are eligible for the CWB and disability tax credit can receive a CWB supplement of up to $720. This credit is reduced by 15 per cent of adjusted net income over $32,244 for single individuals without dependents and $42,197 for families. However, the credit is only reduced by 7.5 per cent if both individuals in a couple are eligible for the supplement.
In addition, in 2019, the government introduced an amendment to clarify that kinship care providers would be considered the parents of a child in their care for the purposes of the CWB. As a result, Kinship care providers would be eligible for the higher CWB amount available for families, provided all other eligibility requirements are met. This applies retroactively to 2009 and subsequent years.
Consider the following acceptable ways of shifting income to family members whose taxable income is below the lowest tax bracket, approximately $45,142. This will allow them to take advantage of certain non-transferable credits as well as lower tax rates.