As summer winds down and Canadian students start heading back to school, what better time than now to take a closer look at tax reduction opportunities for your children and grandchildren.
In part 1 of 2-part series, we take a look at the tax options you have during your child's first years.
For many, the tax savings that your children can bring are introduced to you even before you leave the hospital with your precious newborn. I recall flipping through the baby “welcome” package in the hospital cafeteria to find numerous inserts promoting companies offering RESPs.
An RESP, or registered education savings plan, is a great way to put away money for your children's (or grandchildren's) post-secondary education.
Contributions to an RESP are not tax-deductible, however, the growth in the plan accumulates tax-free. Starting an RESP early in your child’s life means this future income can grow tax-free for a longer period of time.
Fitness and Arts Tax Credits
Once your child reaches school age—or even sooner—and starts participating in outside activities, you have some tax credits at your disposal.
The Children’s Fitness Tax Credit is a claim of a maximum of $500 per child per year relating to the cost of registration or membership in a prescribed program of physical activity.
Although the maximum claim of $500 per child sounds impressive, the end impact on your tax filing is somewhat less significant. To calculate the tax credit, you multiply physical activity expenses by the lowest marginal tax rate of 15%, which amounts to a maximum federal credit per child of $75.00.
Like the fitness tax credit, the Children’s Arts Tax Credit allows you to make a maximum claim of $500 per year based on costs for prescribed programs of artistic, cultural, recreational or developmental activity. Examples of eligible programs include, but are not limited to: