The high cost of raising a child can be challenging for parents, especially for low-income families. To address this issue, the Canadian has made available a Child Tax Benefit since 1993.
The Canada Child Tax Benefit (CCB) allows the eligible parent(s) a particular amount per month per child while categorizing the children in two age groups – below six years of age and 6-17 years. Keep on reading to know more about CCB or check this article.
In 2016, the Universal Canada Child Benefit (UCCB) replacement by the new Canada Child Benefit or the Canada Child Tax Benefit was signified as a game-changer. When the former benefit was a taxable payment, the new CCB became a tax-free monthly payment for eligible families.
What is Canada Child Benefit?
The Canada Child Benefit is a tax-free monthly payment intended for the parents that have a child or children below 18. This payment is made by the Canada Revenue Agency (CRA) as monetary relief for the upbringing of children.
It is prudent to mention that you can’t apply for the Canada Child Tax Benefit after your child has turned 18.
You will get the benefit depending upon your family income from the previous tax year, which is recalculated every year. A complex calculation decides upon the amount based on the Adjusted Family Net Income (AFNI).
CCB program includes the Child Disability Benefits and the federal, provincial, and territorial programs. You get the Child Disability Benefits automatically without needing to apply.
Low-income families benefit most from this plan. The higher your annual income, the lower your monthly CCB allowance. Such families can choose an alternative, like Child Plan ™, with no contribution limits.
Canada Child Tax Benefit eligibility
You must fulfill all the following criteria to be eligible to receive CCB advantages:
- You and a child under the age of 18 must be living together.
- The child must be primarily dependent on you for care and raising.
- You must be a tax-paying resident of Canada.
- You, your spouse, or your partner are one of the following:
- a Canadian citizen
- a permanent resident of Canada
- a protected person
- a temporary Canadian resident living in Canada for at least 18 months with a valid permit for the 19th month, or
- an Indian (as per the Indian Act)
It’s not essential to be a parent to qualify for CCB. Even if you are fully or partially responsible for the upbringing of a child under 18 years of age without being a parent of the child, you are still eligible to apply for the CCB.
Another crucial thing is that, if somehow your eligibility status is changed, it is better to report it to the CRA as soon as possible. The violation of this may lead you to further legal complications.
Applying for CCB in Canada?
To get the CCB, you need to apply to the CRA:
- when your child is born, or
- when the child starts living with you, or
- when you begin, end or change shared custody of the child
Your benefit will be automatically delivered to your bank account following your application. You are not required to show any receipt.
Now, there are three processes through which you can apply for CCB in Canada:
- Through the birth registration of your child with the help of the Automated Benefits Application
- Through CRA My Account.
- Using mail applications
How much can you get from the CCB?
Your monthly CCB amount depends upon certain factors. However, you can estimate it through the Canada Revenue Agency’s online calculator.
The age of the child/children you’re responsible for, the number of children, your or your family’s net income, marital status, etc., affects this estimation.
If your adjusted family net income is below $32,028 in a tax year, you are going to receive an amount of around $583 per child per month (approx $8,490/year) in the next tax year, in case the child is below six years of age.
In the same scenario, you will get around $491 per month ($7,397/year) for every child between the age of 6 and 17.
On the other hand, your monthly payment gets reduced if your adjusted family net income exceeds $32,028 per year. When your AFNI falls between $32,028 and $69,395, the payment allowance will get reduced by 7% of the income above the threshold.
Likewise, if your adjusted family net income exceeds $69,395, your benefit is to be reduced by $2,590 plus 3.2% of the exceeded income amount.
And if your AFNI exceeds $112,500, no benefit will be allowed to you.
Alternatives of Canada Child Tax Benefits
CCB can be really beneficial for you if your AFNI falls within the requisite limits. However, CCB isn’t much use for families with AFNI of over $107,050. Apart from Child Disability Benefit, such families cannot avail of any CCB advantages.
A Whole Life Insurance Plan like Child Plan ™ is an alternative for parents to secure their children’s future. While CCB has age restrictions and income constraints, you can open a Child Plan ™ once your little one turns 14 days old.
Moreover, there are no income or contribution restrictions either. That is, you can invest the desired amount, and your child will continue to receive a tax-free payment each year for the rest of their life, provided that the premium is paid regularly.
You can transfer the Child Plan ™ fund to your kid anytime after turning 18. Your child can use the dividend for:
- Paying educational fees anywhere in the world
- Paying the downpayment of their first home
- Funding a new business
- Funding any financial needs in the lifetime
A True CCB Alternative
The CCB has been available in Canada in some form since 1993. The alternative to the CCB is Child Plan ™ Participating Whole Life Insurance which has been available for 175 years.