Top 5 Things to Know About the Canada Child Tax Benefit
The April 30th filing deadline will be here soon enough, so it’s time to start thinking about individual income taxes, and all of the various components that go into providing the federal government with a financial “snapshot” for the past year.
For separated or divorcing spouses with children, one of those components is the Canada Child Tax Benefit (CCTB).
The Canada Revenue Agency (CRA) administers the CCTB, which is a monthly, tax-free benefit received on behalf of a child under the age of 18. Its purpose is to assist families with child-raising costs, and its value depends on family income, among other things. The benefit amount is either mailed out by cheque, or – if the recipient requests it – can be direct deposited to an account held with a financial institution.
For parents who are separated or divorcing, the question arises as to how the CCTB is calculated and which of the parents is entitled to receive it. Here are the most important points to know:
1) Eligibility is determined by the Income Tax Act. Once a CCTB application form is filled out by one or both parents, the Act’s stipulated eligibility requirements are applied to determine which parent is entitled to the benefit. The dollar-amount of the CCTB is calculated with reference to the applicant’s income for the previous year (together with the income of any cohabiting spouse or common-law partner, if applicable).
2) Usually, the custodial parent receives the CCTB. Where the child splits time between different residences, the parent with primary responsibility for his or her care receives the CCTB. The CRA will make this determination, after reviewing the circumstances and assessing which parent provides the majority of the child’s care and upbringing. To do so, the CRA will refer to a number of specific legislated factors, and will consider the provisions of any existing court order.
3) If custody is shared equally, then each parent may be entitled to the CCTB for 6 months of the year. The CRA currently does not split the benefit entitlement into periods of less than half-year, no matter what the actual custody and living arrangement may be. Furthermore, for CCTB purposes, spouses are only considered separated if they have lived separate and apart for 90 days or more.
4) Only one parent is eligible for the CCTB in any given month. The monthly CCTB amount cannot be shared or pro-rated between parents, no matter how the child’s actual living arrangements are structured.
5) Eligibility for the CCTB ends when the child turns 18. It may also end if the custody of the child changes, or if the parents fail to meet other eligibility requirements (particularly those relating to family income).
Note that the CCTB received by an eligible parent may include an amount for the Child Disability Benefit (CDB), which is an additional monthly benefit for qualifying families of children with several and prolonged mental or physical impairment. It also incorporates the National Child Benefit Supplement (NCBS), which is the federal contribution to the National Child Benefit, a program aimed at assisting low-income families with children.
For more information on the Canada Child Tax Benefit, see the CRA website at http://www.cra-arc.gc.ca
Additional information on family law issues can be found on our web site www.russellalexander.com