Canada Child Benefit

Understanding the Canada Child Benefit

The Canada Child Benefit is a tax-free monthly payment made to eligible families to help them with the cost of raising children under 18 years of age. This benefit was introduced by the Government of Canada with the 2016 Federal Budget.

One common misconception about this program is that the amount parents will receive is based on gross income. In actual fact, it is calculated on the adjusted family net income. First, it is important to understand what is meant by family net income. The Government of Canada defines it is as follows:

Family Net Income – is your net income (line 236 of your income tax and benefit return) added to the net income of your spouse or common-law partner, if you have one. Family net income does not include your child’s net income. If you or your spouse or common-law partner were non-residents of Canada for part or all of the year, family net income includes your or your spouse’s or common-law partner’s income from all sources, both inside and outside Canada, for any part of the year either of you were not residents of Canada.

Now, the definition of Adjusted Family Net Income is:

Adjusted Family Net Income – is your family net income (defined above) minus any universal child care benefit (UCCB) and registered disability savings plan (RDSP) income received plus any UCCB and RDSP amounts repaid.

Let Us Help

Net income is calculated after any RRSP contributions are deducted. In simple terms, this means the more money a parent contributes to their RRSP, the higher the Canada Child Tax Benefit they may be eligible for. However, this is just one of many factors to consider when making decisions about your personal tax situation. Let our experts help you figure it out. Contact a member of our Wealth Management Team or book an appointment online today. 
 

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