Canada Will Give You Free Money!

by Tax Guy - Burlington Accountant on January 18, 2011 Print This Post Print This Post

It may be a reduction in income tax, a benefit paid directly to you, or some other form of grant, but the Government of Canada wants to give you money for any number of reasons.

The system of income tax in Canada is used not only to raise revenue for roads and defence, it is also used to affect social policy. This means that the income tax collected is used to re-distribute the funds to encourage (or discourage) certain forms of behaviour.

Child Tax Benefit

The Child Tax Benefit or CCTB for short, is a tax-free distribution made to help you with the cost of raising children. It is intended to reduce the depth of child poverty, ensure families are better off by working, and reduce the overlap of government services. Even if you have a relatively high family income, you can still receive the CCTB, so if you are not already receiving it, complete the CRA application on-line.

Child Disability Benefit

This benefit is part of the CCTB program and is available to the parents of children under the age of 18 who suffer from severe mental of physical disabilities. If you are able to claim the Disability tax Credit amount on your tax return, you may be entitled to this tax-free benefit as well. In order to qualify, your child must be under the age of 18 and have a Disability Tax Credit Certificate. For more information see the CRA site on this topic.

Tax Tip: If you receive amounts under the CCTB program and are able to deposit these amounts into an investment account in your child’s name, the investment income earned will be taxed in the child’s hands. In most cases, the child pays little or no tax.

Universal Child Care Benefit

If you have children that are day-care age, the government will give you an additional $100 per month per child to help offset the cost of daycare. If you apply for the CCTB, you are automatically enrolled in this program as well. While, these payments are taxable, they are available to all Canadians regardless of income.

Child Fitness Tax Credit

This is a non-refundable tax credit that reduces your annual tax bill by up to $500 for each child under the age of 16 if they are enrolled in a qualifying fitness program (hockey, soccer, etc.). See the CRA site on the fitness tax credit for more.

GST Credit

If you are over the age of 19 and have filed an income tax return, you may qualify for the GST tax credit. This amount is paid to you, tax-free, on a quarterly basis. The credit is phased out when your income is over $32,000.

Old Age Security (OAS)

If you have been a resident of Canada for at least 18 years after age 18, you may be entitled to receive OAS. This is retirement income paid that is intended to reduce poverty of elderly Canadians. The payment is reduced when your income is above $66,000. See more about The OAS Clawback here.

Guaranteed Income Supplement (GIS)

This program provides additional money, on top of the Old Age Security pension, to low-income seniors living in Canada. To be eligible for the GIS benefit, you must be receiving the Old Age Security pension and meet the income requirements. The rates and thresholds vary depending on whether you are single or married. See the Service Canada site on OAS and GIS.

About The Tax Guy...

Dean Paley CGA CFP is a Burlington accountant and financial planner who services individuals and business owners locally, nationally and internationally. Dean has appeared in the National Post, Toronto Star and Metro News.

To find out more, visit Dean's website Dean Paley CGA CFP or connect via Twitter @DeanPaleyCGACFP.

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Al-Riyaz March 10, 2011 at 5:02 pm

Hello! I find it interesting, and somewhat irritating, when opinion leaders refer to “Free Money” in this context; I heard Amanda Lang (CBC News) refer to it as such a few weeks back as well when speaking to the topic of RRSP, TFSA, etc. It really isn’t “Free Money”, is it? It’s simply our own money that we can try to hold on to from the large chunk various levels of govt. take in the form of taxes, fees, etc. When you refer to it as “Free Money”, it simply entrenches the mindset that it has become the right of government to tax our income, which is not how income tax first came about (is it?).

Just a thought. Make it a great day!

Tax Guy March 12, 2011 at 4:05 pm

The intent is to explain that there are programs and credits. I agree they ate not free, but to many recipients they are or at a reduced amount.

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