With the Sword of Damocles that is tax season upon us, I thought a report that I read this week may be of use to some of you.
It’s an RBC report based on a poll of Canadian families with young children (under 12 years old) that found that only 58% of those families were making full use of the tax savings available to them.
Of the remaining 42%, 60% (25% of the total polled) stated they were not making full advantage of the tax credits and deductions, and 40% (17% of the total polled) were unaware of their potential tax savings as a parent.
Depending on specific circumstances, I consider the above 25% of parents to be excusable. You can be doing all the right things, but just not have the ability to “make full advantage of the options available.”
Why do I say this? Generally speaking, young children means younger parents, who might not have the financial means to, say, max out an RESP. However, if they’re claiming their deductions and credits, and saving what they can, I think they’re doing perfectly fine, and have set themselves up for the future as income potentially increases.
The 17% who are unaware is just unacceptable.
Highlighted tips for young families from the report:
- Open and RESP – tax-free growth for a child’s post-secondary education with the government matching annual contributions by 20%, up to $500.
- Use Child Care Deductions – expenses like day care, summer camp, and baby sitting can be written off against income to a certain amount.
- Children’s Fitness Tax Credit – allows you to claim up to $500 per child for the cost of certain fitness programs.
- Child Amount Tax Credit – gives you a tax credit of $2089 for each child under the age of 18.
- Open a TFSA – though not specific to parents, the report points out that the tax-free growth can be used for anything including your children or family life in general.
One that I would add (depending on where you live) is to make sure you have applied for the HST tax credit. Couples can get up to $1000.