Making a family is not just an emotional decision but also a financial decision. Many couples discuss their finances before making major decisions like marriage or a child. Planning for a child involves a lot of expenses. Most of the time, one parent gives up his/her full-time job to care for the child. Canada is an expensive place, and for most families, it becomes difficult to manage expenses with only one person earning. The Canada Revenue Agency (CRA) shares some of your financial burdens by offering parents Canada Child Benefit (CCB) of up to $8,000 in 2021.
Are you eligible for the Canada Child Benefit?
The CRA gives a tax-free cash benefit every month to parents of children below 18 years of age. The idea is to help low and mid-income earners raise children. Hence, the CRA calculates the CCB depending on the child’s age, adjusted family net income (AFNI), and the number of children. You can continue getting the CCB if you file your tax returns regularly.
The last date to file your tax returns is April 30. The CRA will assess your returns and accordingly calculate your CCB for the July 2021-June 2022 period. It will then credit the amount between the 18th and 20th of every month. All you have to do is register your child’s name with the CRA when you collect your child’s birth certificate.
Only a parent or custodian of a child can get the CCB, and the beneficiary should be a Canadian resident. A foster parent can’t claim the CCB.
The CRA makes changes to the Canada Child Benefit
Every year, the CRA adjusts all its benefits, including the CCB, for inflation. For the July 2021-June 2022 period, you can get a CCB of $6,833 for a child under six, which is lower than last year’s $6,765. The CCB reduces to $5,765 for a child between six and 17 years of age, which is lower than last year’s $5,708.
- You can avail of the maximum CCB if your AFNI is below $32,028 in 2020, even if you have more than one child.
- In the second phase, the CRA will phase out the first child’s CCB at the rate of 7% if your AFNI is between $32,028 and $69,395. The phase-out rate will increase to 13.5% for the second child and 19% for the third child.
- In the third phase, the CRA will deduct $2,616 from the CCB for the first child and then phase out the remaining benefit at the rate of 3.2% of your surplus income. For your second child, the phase-out will be $4,995 + 5.7%, and $7,029 + 8% for the third child.
The CRA is giving a special relief in 2021 if your AFNI is less than $120,000. If your child is below six, you will get an additional $300/quarter in temporary CCB. However, this benefit will stop if your kid turns six before December. For instance, Joey and Janet have four-year-old twins, and their AFNI is $32,000. They will get a total CCB of $8,033 per child ($6,833 in normal CCB + $1,200 in temporary CCB).
Make the most of the extra $1,200 benefit
It is not every year the CRA gives such generous additional tax-free benefit. This is a good time to use this benefit and make it last longer in your Tax-Free Savings Account (TFSA). Use this benefit to protect your child’s future. The future is in technology as the world adopts the 5G, cloud, artificial intelligence, and autonomous cars. And this time, Canadian companies are playing a key role.
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More reading
- Which Is a Better Investment Account: TFSA versus RRSP?
- CRA Cash Benefit: How to Get Another $6,000 in CRB Payment
- CRA Cash Benefits: Parents Don’t Miss Out on the 1-Time $300 CCB/Child
- CRA Tax Credits: Don’t Miss the $500 Canada Training Credit in 2021
- Got $100? Buy These 3 Buffett Stocks for 2021
Fool contributor Puja Tayal has no position in any of the stocks mentioned. David Gardner owns shares of Sierra Wireless. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of and recommends Shopify and Shopify. The Motley Fool owns shares of Lightspeed POS Inc. The Motley Fool recommends BlackBerry and BlackBerry.
The post CRA Parenting Tips: Don’t Miss Out on the $8,033 Canada Child Benefit appeared first on The Motley Fool Canada.
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