Being a parent changes your entire world. A child brings new happiness, new responsibilities, and new expenses. You want to give the best to your child. Hence, the Canada Revenue Agency (CRA) offers you cash benefits worth $7,000 on every child, provided you file your income tax returns regularly.
The last date to file your 2020 tax returns is April 30. The CRA will look at the details you provide in your returns and accordingly calculate the various cash benefits you are eligible for as a resident and citizen of Canada.
The CRA’s Canada Child Benefit
On the 20th of every month, the CRA credits a tax-free monthly benefit of up to $570 as the Canada Child Benefit (CCB) into your bank account updated with it. Now there are rules on eligibility, how to apply, and the amount you get under the CCB.
Starting with eligibility, you should be a Canadian resident and the custodian of a child under 18 years of age. The custodian can be any person taking care of the child’s daily needs, medical needs, and child care. But you can’t get the CCB if you are a foster parent.
If you meet the above criteria, you can apply for the CCB when you register your child’s birth or through My CRA Account. You can also claim the CCB when you get custody of the child. It is better if the female parent claims the CCB. The CCB benefit period starts from July 2021 to June 2022.
What’s your CCB amount?
The CRA calculates the CCB based on your adjusted family net income (AFNI) as per your tax returns and your child’s age. If your AFNI is $32,028 in 2020, you can get a maximum CCB of
- $6,833 ($570/month) for a child under six, and
- $5,765 ($480/month) for a child between six and 17 years of age.
The CRA starts phasing out the CCB at the rate of 7% on income above $32,028 and below $69,395. Beyond this AFNI, the CRA deducts $2,616 and 3.2% of your surplus income from your CCB. This math is for your first child. If you have more than one child, the CRA phases out CCB for your second child at a higher rate.
An example will make this clear. Anna and John have two kids, Mary five-year-old, and Malcolm eight-year-old. Their AFNI is $60,000. For Mary, they will get a CCB of $4,875 ($6,833-$1,958 (7% of surplus income)). For Malcolm, they will get a CCB of $1,989 ($5,765 – $3,776 (13.5% of surplus income)). They will get $6,864 in CCB for June 2021-July 2022 period for both the kids.
The CRA’s goods and service tax refund
Apart from the CCB, the CRA also gives a $157 in Goods and Service Tax (GST) refund on every child if your AFNI is below $38,892. If your income is less than $32,000, your six-year-old can get you $6,990 in CRA cash benefits.
Save for your child’s future
The CRA not only gives you cash benefits but also tax benefits if you save for your child’s future through Registered Education Savings Plan (RESP). You can contribute a maximum of $50,000 in 30 years in the RESP. You can deduct the RESP contribution amount from your taxable income. Your child can withdraw from RESP when he/she turns 18.
The RESP is a long-term investment for a better future for your kid. I would suggest you invest in futuristic stocks like Northland Power (TSX:NPI). The company produces clean energy from offshore wind and solar power. The energy industry is going through a transformation, and countries worldwide are looking to replace oil and natural gas with environment-friendly energy.
Northland Power has 2.5 GW of renewable energy projects and has around 1.5 GW of projects under construction. Its stock surged 9.5% year to date as the U.S. President Joe Biden announced the US$2 trillion clean energy package. Offshore wind energy is a major beneficiary of Biden’s package, which means Northland Power will see strong growth in the next four years and years ahead.
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Fool contributor Puja Tayal has no position in any of the stocks mentioned.