Monday, July 27, 2015

Universal Child Care Benefit (UCCB) Vote buying at its best (worst)

The Canadian government is out to buy votes to ensure victory in the next Federal Election. This month the government of Canada sent out checks on a program it announced in January, because there was a need to have time needed to get the program up and running, the government delivered the first seven months of payments this week, in lump-sum payments of $420 or $520 per child.  This is an interesting position because the UCCB has been available to Canadian families with kids five and under since 2006. 

In 2014, and then again in this year’s budget, the Government of Canada announced they were increasing that amount to $160 per month for families with kids under 6, and $60 per month for those with kids under 17.

The increase has been in effect since January 1, but there had been no payouts until this week, when the government released all retroactive payments for the first six months of 2015 and started the new increased UCCB payments going forward. Families with kids five and under will have received $520 and families with kids 6-17 will have received $420.

What the government is not saying is that most of this money will be clawed back because of the elimination of the Child Tax Credit. As well the money received under the UCCB program is taxable.

How much is clawed back?
With the enhanced UCCB, Canadians will receive an extra $720 annually for each child under 18, including the lump-sum payments this week retroactive to the start of the year.

However, on the same day the UCCB came into effect (Jan. 1), the federal government also eliminated an existing child tax credit of $2,255, which was worth $337.50 per child annually in 2015. That change alone wipes out almost half of the UCCB increase for taxpayers.

Remember, the UCCB money is a taxable benefit,  both federally and provincially, meaning the amount families receive will be added to their income and they will pay income tax on it when you file your returns next year. In most cases the UCCB payments are added to the lower-earning spouse’s salary. 

However, as a rule, whoever is receiving the UCCB money is the one who will have to add it to their income during tax time. If you’re worried about being stuck with a tax bill, put part of the UCCB money aside so you’re not struggling to find the cash next year to pay the Canada Revenue Agency (CRA)

An Ontario parent earning $50,000, for example, pays income tax at a combined marginal rate of 31.15 per cent. So, with $720 of added income from the UCCB, an additional $224.28 would be clawed back as taxes next year. Source:

Those two factors leave $158.22 a year per child for that Ontario parent, or an additional $13.18 a month net.

The majority of Canadians who live in provinces with higher marginal tax rates than Ontario, and would keep even less. People in British Columbia would keep a few cents more than people in Ontario. Higher income earners will keep slightly less of the benefit, while people with low incomes will keep more.


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