Becoming a parent for the first time is a wonderful and exciting event that will forever change you, though it may be one of the greatest moments in your life it doesn’t necessarily mean it’s going to be straightforward and easy. METRICS may not be able to solve all of your parenting dilemmas but we can provide you with the information to get you the most out of the current available tax benefits and make good use of these opportunities to maximize your return.
When you have your baby, you will register them for a birth certificate, health number, and SIN number. That registration allows you to participate in the Canada Child Benefit: this is a tax-free monthly payment made to eligible families to help with the cost of raising children. You can receive up to $6,400 per year for each child under 6 years old. CLICK HERE for more info on the CCB.
Depending on your income, you may also qualify for a GST credit: A tax-free quarterly payment of up to $560 per year, made to modest-income families. If you are eligible for the GST/HST credit and have children, you could also get up to $147 per year, for each child under 18 years old.
Additionally, you will be eligible for contributions into the Registered Education Savings Plan (RESP). On annual contributions of $2500, the government of Canada will match you with their Canada Education Savings Grant equal to 20% of the contribution up to $500 annually (CESG). You are welcome to contribute more to the fund to save for your child’s post-secondary education (in any formal institution, not necessarily a University), but you will not get an additional grant, so $2500 annually maxes the value.
When we file your personal taxes- we will declare NEWONE and you will get to claim childcare payments to a third party (nanny or preschool) as well as any of their eligible medical expenses.
EI and maternity leave- you should be aware that EI does not deduct taxes from their payments to you, as EI assumes (often incorrectly) that you have no other income in the year. Should you earn EI and income from another source (a job) in the year, you should plan for savings to cover the taxes owing on the EI payments in the year.
The cost of raising a child in 2020 can be significant, luckily the government of Canada offers some generous benefits to help those that need it.