The Government has recently introduced the Family Tax Cut, a new non-refundable tax credit of up to $2,000 for eligible couples with minor children.

This new tax credit will be effective for the 2014 and subsequent tax years.

This credit is calculated AS IF a spouse with higher income transfers up to $50,000 of his/her taxable income to another eligible spouse or common-law partner. But the actual net income and taxable income of both spouses will remain unchanged. As a result, all benefits and tax credits that are calculated based on net income, such as the GST/HST credit, the CCTB, the age amount, and the spouse or common-law partner amount, will not change.

You can claim the Family Tax Cut for a year if:

– You were a resident of Canada on December 31 of the year (or on the date of death);
– You have an eligible spouse or common-law partner for the year who has not claimed the Family Tax Cut;
– You have a child who is under 18 at the end of the year who ordinarily lives throughout the year with you or your eligible spouse or common-law partner;
– You were not confined to a prison or similar institution for a period of at least 90 days during the year;
– Neither you nor your eligible spouse or common-law partner became bankrupt in the year.

Of course, both you and your eligible spouse or common-law partner will have to file an income tax return (T1) for 2014.

This credit cannot be shared – either you or your eligible spouse or common-law partner can claim the Family Tax Cut for a year, but not both.

To claim the credit, you should complete the new Schedule 1-A, Family Tax Cut. The amount calculated is then entered on line 423 of the Schedule 1 of your T1.

As part of the Family Tax Cut, the government will also boost the Universal Child Care Benefit (UCCB) from $100 to $160 a month for each child under six, and add a new child-care benefit of $60 a month for each child aged six to 17. The enhanced UCCB would replace the existing Child Tax Credit, starting in the 2015 tax year. The Child Tax Credit is a non-refundable tax credit which allows parents to claim a certain amount per child under the age of 18.
The Government has also previously announced that the federal children’s fitness tax credit will be doubled starting in 2014, to a maximum credit of $150 per child from $75, and made fully refundable as of 2015. A refundable credit means that parents who do not pay income tax will still get money from the Government.