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: http://www.cbc.ca/news/politics/3-things-to-know-about-the-uccb-payments-impact-1.3161108
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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