Many Canadian parents are missing out on claiming some child-care-related expenses at tax time and it could potentially result in thousands of unclaimed dollars.
According to a recent survey by TurboTax, only seven per cent of Canadians plan to take advantage of child-care-related tax credits and deductions. Without claiming these expenses, parents with children under the age of seven could be losing up to $8,000, while parents of kids under 16 could be missing out on up to $5,000.
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The reasons for missing out can vary from lack of understanding to the way the taxes are being prepared, tax expert Tatiana Cherviakova of TurboTax says.
“Parents not only have to keep track of children but their receipts and money they spend,” she says. “A lot of these expenses can be deductible and be of benefit during tax time. That’s a challenge of time and also knowing what is deductible, how it’s treated on your taxes and what is the benefit.”
And claiming these benefits will help parents and their children in both the short and long term, Cherviakova adds.
So if you’re a parent and don’t know what kind of credits and deductions are out there to claim, here are four to consider:
- Child-care expense deduction: Parents can claim this if they hire caregivers or enrol their kids in day nursery schools and centres, educational institutions that provide childcare services, day camps and boarding schools or overnight camps.
- Canadian child benefit: This is a tax-free monthly payment made to families who are eligible, to help them with the cost of raising a child under the age of 18.
- National child benefit: This supplements the Canada child benefit. It provides support to low-income families. Benefits are paid over a 12-month period and are adjusted every July, based on information from your previous year’s return.
- Child disability benefit: This benefit is for families who care for a child under the age of 18 who has a severe or prolonged physical or mental impairment
Remember, however, that the federal government has eliminated the tax credits for fitness and art as of 2016, making last year the last time parents could take advantage of it.
But if you still want to find a way to claim your child’s fitness and art activities despite the change, one trick Cherviakova suggests is that parents find child-care providers with art and fitness programs incorporated in the child-care fees. That will ensure that children still participate in the activities, while parents get the benefit as it can be claimed as part of the daycare expense.
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Cherviakova also offers other tips parents should keep in mind when preparing to do their taxes and claiming certain benefits.
First, always make sure to get a receipt for any services your child may get. This will help parents to keep track of expenses, as well as have proper proof for the government in case of any reviews.
This includes any medical expenses, tuition and the use of public transit. Remember, however, that payments for private schools do not apply and any claims of tuition paid must be because the child is in college or university, Cherviakova points out.
If a nanny is hired to care for your children, Cherviakova says it can qualify to be claimed as child care. And any summer camps your child may attend when their regular child-care providers are not available is also partly deductible based on the child’s age.
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Lastly, if a child is going through post-secondary education, tuition can be claimed by a child – or if there is not much benefit on the child’s return then it can be transferred to a parent. So if your child is in college or university, make sure they file a tax return.
For any other questions or tips for parents and other tax filers, TurboTax offers plenty of advice and can be accessed on their blog here.