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Header Canadian tax credits for new parents
• Mar. 30, 2023

Welcome to parenthood, where your newest family member adds an extra layer of complication to filing your taxes.

But complicated doesn't have to mean bad.

When you welcome a new member to your family, you become eligible for certain government benefits and tax credits which could help reduce how much income tax you owe the government each year. They might even have the potential result of a tax refund which could help cover some of the costs associated with the arrival of your new bundle of joy.

So, what are these credits and benefits? Here are a few things new parents should know.

Tax credits available to parents

One of the last things you probably want to do after the birth of your child is paperwork. But sorry to say, it's inevitable. You'll have to register your child's birth, sign them up for a Social Insurance Number (SIN), and potentially even a passport.

When you register their birth, you'll have the option to apply for Canada child benefits by giving consent to your province or territory to share the birth registration information and SIN with the Canada Revenue Agency (CRA).

This process is referred to as the Automated Benefits Application and it lets you apply for the Canada Child Benefit (CCB); the goods and services tax/harmonized sales tax (GST/HST) credit for low and modest-income families; and certain provincial and territorial programs administered by the CRA.

Here's a quick overview of some of these programs:

1. Canada Child Benefit (CCB)

    The Canada Child Benefit is a tax-free monthly payment meant to help families with children under the age of 18. The CRA determines how much you receive based on the number of children you care for, the ages of your children, your marital status, and your adjusted family net income, as reported in your tax return. The CRA calculates your payments annually each July. If your income is above a certain amount, you won't receive payments. Learn more about the CCB from the Government of Canada.

    2. Child Disability Benefit (CDB)

        Families caring for children under the age of 18 with a severe or prolonged mental or physical disability are eligible for tax-free monthly payments. To receive them, you must also be eligible for the CCB and your child must be eligible for the disability tax credit (DTC). The CRA notes that if you're getting CCB for a child eligible for the DTC, you don't need to apply for the CDB – you will get it automatically. Learn more about the CDB from the Government of Canada.

        3. Canada Caregiver Credit (CCC)

          The Canada caregiver credit is a non-refundable tax credit that you may be eligible for if you support a dependent (or a spouse or common-law partner) with a mental or physical impairment. Learn more about the CCC from the Government of Canada.

          4. Other provincial and territorial programs administered by the CRA

            There are other tax credits available at the provincial/territorial level which differ across Canada. For example: in Ontario, you may be eligible to claim your childcare expenses both federally and provincially. Take a peek at the Government of Canada's geographic breakdown of available tax credits.

            Claiming childcare expenses

            Depending on where you live in Canada, your search for childcare might start while your little one's still in utero. If you pay someone, such as a nanny or daycare centre, to care for your child when you head back to work or school, you can claim eligible expenses on line 21400 of your income taxes. As your baby grows, you can continue to claim childcare expenses for places like day camps, overnight camps, boarding schools and more until your child turns 16.

            Remember: whether you pay an organization or an individual for childcare, they're required to provide you with a receipt. Receipts from an individual, such as a nanny, must include their social insurance number. You're not required to submit these documents when you file your taxes, but they're important to retain because the CRA could ask to see them.

            Get more details on line 21400 and claiming childcare expenses from the Government of Canada.

            You might owe taxes at the end of your parental leave

            The employment insurance benefits you may receive on a parental leave are taxable. That means that the federal and provincial governments deduct taxes from your benefits. However, you might wind up owing more income tax because these deductions don't take into account any employer top-ups you might receive, or any employer bonuses paid out in the current fiscal year that you earned prior to going on leave. You may want to consider speaking to an accountant or tax professional if you're concerned, and consider putting aside some money each month to build up an income tax fund.

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