Family Tax Cut

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Family Tax Cut

I just finished my first tax return for a family that is eligible for the Family Tax Cut that was announced in October 2014 and affects the 2014 tax year.

What is the Family Tax Cut?

The Cut only applies in certain situations:

  • You and your eligible spouse or common-law partner lived in Canada at December 31 of the applicable tax year.
  • You have a child that was under 18 at the end of the tax year who normally lives with you and your spouse or partner.
  • You and your partner both file a tax return for the year.
  • Neither you nor your eligible spouse or common-law partner elected to split eligible pension income for the tax year.

The Family Tax Cut was brought in to equalize taxes paid by families in Canada who have minor  children. The Conservative Government wishes to encourage families that have small children to have one parent stay at home and be caregiver of those children. In this situation there is generally one high income earning spouse and one low income earning spouse. Because personal income tax rates increase with the level of income of the individual, a family with one high income earning spouse will pay more than a family comprised of two taxpayers who earn equal amounts of income.

The Family Tax Cut is essentially a non-refundable tax credit of up to $2,000 that can be claimed by one taxpayer. It cannot be shared between the taxpaying couple.

If you share parenting of your minor child with a former spouse, you can only take advantage of the Family Tax Cut if you have re-married or are in a new common-law relationship. In this case both you and your former spouse may apply for the Family Tax Cut if your child ordinarily lives with both you and your former spouse throughout the tax year.

There are other rules on eligibility so check with your tax preparer to determine if you are eligible.

 

 

 

By | 2016-11-25T02:24:53+00:00 February 25th, 2015|Tax Tips|0 Comments

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