The high cost of raising a child can be a challenge for parents, especially for low-income families. To address this problem, the Canadian has provided a child tax benefit since 1993.
The Canada Child Tax Benefit (CCB) allows the eligible parent(s) a certain amount per month per child, while dividing the children into two age groups: under six years and 6-17 years. Keep reading to know more about CCB or check this article†
In 2016, the Universal Child Benefit Canada (UCCB) replacement with the new one Canadian Child Benefit or the Canada tax break for children was referred to as a game-changer. When the former benefit was a taxable payment, the new CCB became a tax-free monthly payment for eligible families.
What is Canadian Child Benefit?
Canadian Child Support is a tax-free monthly payment intended for parents who have a child or children under the age of 18. This payment is made by the Canada Revenue Agency (CRA) as a monetary allowance for the education of children.
It is wise to mention that you can no longer apply for the Canada Child Tax Benefit after your child has turned 18.
You will receive the benefit depending on your family income from the previous tax year, which is recalculated every year. A complex calculation determines the amount based on the Adjusted Net Income Family (AFNI).
The CCB program includes child support and the federal, state and territorial programs. You will automatically receive the child benefit without having to make an application.
Low-income families benefit the most from this plan. The higher your annual income, the lower your monthly CCB allowance. Such families can opt for an alternative, such as Child Plan™, with no contribution limits.
Canada Child Tax Eligibility
You must meet all of the following criteria to be eligible for CCB benefits:
- You and a child under the age of 18 must live together.
- The child must first and foremost depend on you for care and upbringing.
- You must be a tax-paying resident of Canada.
- You, your spouse or your partner belong to the following persons:
- a Canadian citizen
- a permanent resident of Canada
- a protected person
- a temporary Canadian resident residing in Canada for a minimum of 18 months with a valid permit for the 19th month, or
- an Indian (according to Indian law)
It is not essential to be a parent to be eligible for CCB. Even if you are wholly or partly responsible for raising a child under the age of 18 without being the parent of the child, you are still eligible for the CCB.
Another crucial point is that, if your eligibility status is changed in any way, it is better to report it to the CRA as soon as possible. Violation of this may lead to further legal complications.
Apply for CCB in Canada?
To get the CCB, you must: apply to the CRA†
- when your child is born, or
- when the child moves in with you, or
- when you start, end or change joint custody of the child
Your benefit will be automatically credited to your bank account after your application. You are not required to show a receipt.
There are now three processes through which you can apply for CCB in Canada:
- By registering your child’s birth using the Automated Benefits Application
- Via CRA My Account.
- Using Mail Applications
How much can you get from the CCB?
Your monthly CCB amount depends on certain factors. However, you can estimate it through the Canada Revenue Agency’s online calculator.
The age of the child(s) you are responsible for, the number of children, your or your family’s net income, marital status, etc. affect this estimate.
If your adjusted family income is less than $32.028 in one tax year, you will receive approximately $583 per child per month (approximately $8,490 per year) in the following tax year, if the child is under six years of age.
In the same scenario, you get about $491 a month ($7,397/year) for each child between the ages of 6 and 17.
On the other hand, if your adjusted household income exceeds $ ., your monthly payment will be reduced32.028 per year. When your AFNI is between $ . fall32.028 and $69,395the allowance is reduced by 7% of the income above the threshold.
Likewise, if your adjusted household income is more than $69,395your benefit will be reduced by $2,590 plus 3.2% of the exceeded income.
And if your AFNI is more than $112,500, you won’t get a benefit.
Alternatives of Tax Breaks for Children in Canada
CCB can be really helpful for you if your AFNI is within the required limits. However, CCB is not of much use to families with an AFNI over $107,050. Apart from the child benefit, such families cannot enjoy a CCB benefit.
A Whole Life Insurance Plan such as Child Plan™ is an alternative for parents to secure the future of their children. Although CCB has age restrictions and income restrictions, you can open a Child Plan™ as soon as your little one turns 14 days old.
In addition, there are also no income or contribution restrictions. That is, you can invest the desired amount and your child will continue to pay tax-free for the rest of his life, provided the premium is paid regularly.
You can transfer the Child Plan™ fund to your child at any time after they turn 18. Your child can use the dividend for:
- Pay tuition fees anywhere in the world
- Paying the down payment on their first house
- Financing a new business
- Financing Lifetime Financial Needs
A true CCB alternative
The CCB has been available in Canada in one form or another since 1993. The alternative to the CCB is: Child Plan™ Participating Life Insurance which has been available for 175 years.