A Brief Guide to the Child Disability Tax Credit

 

For parents of a child with a disability in Canada there is a welcome form of financial support in the Child Disability Tax Credit. Parents of a child with a disability can receive up to $224.58 per month as assistance from the government. The benefit is meant for parents who have a child with a permanent disability (under the age of eighteen), and is given to parents as a tax-fee benefit. Parents will receive the credit each month to assist them with whatever needs they deem to be important.

There are many benefits to this credit namely that it can co-exist with other forms of support such as grants for services, caregivers, or adaptive technology. Many parents of a child with a disability incur a high degree of costs associated with the nature of their child’s disability. Some of these costs are:

  • Multiple forms of physical, play or other forms of therapeutic therapy
  • A need for various medications (sometimes multiple medications together)
  • Special programs and services
  • Caregivers to assist in the home
  • Specific equipment and adaptive technology
  • Occupational therapy
  • Dental work
  • Psychotherapy for parents and/or family members

In some children who experience a complicated condition such as Fetal Alcohol Syndrome, there will likely be a need for multiple forms of treatments, different medications, long hospital stays, and other complicated needs.

The amount of money parents receive is dependent up on a few factors:

  • The nature and complexity of the child’s disability
  • The parent’s income
  • The nature of the treatments recommended by physicians and other treatment professionals

At Disability Credit Canada, we help your children have the best childhood possible by assisting you in applying for a Child Disability Tax Credit.  The amount you save from paying higher income taxes can now help pay for necessary aid in raising your children with disability. The Child Disability Benefit can help children of all ages, starting from infancy, to attending preschool all the way to high school.

The Child Disability Benefit is home to various programs that help disabled children achieve their full potential. This is funded by the government through our taxes and other resources, as well as partnerships with non-profit charitable organizations and generous donations from private industries. The Child Disability Benefit is administered and given out by the government in various child and family support programs through Service Canada or its Services for Families and Children program. These include:

  • Canada Child Tax Benefit: This is a monthly payment which is tax free to parents with children under the age of 18. For parents with a child who has a disability there is the previously discussed Child Disability Benefit.
  • Child Care Subsidy: This is geared to low-income families who require additional financial services to assist them with the care of their children also under the age of 18.
  • Child Rearing Drop-Out Provision: This is another supplement geared towards parents or caregivers who have a low or zero income. The purpose of this is to remove the burden of making contributions to the CPP or Canada Pension Plan. For these families, the amount of amount they would have to put into the CPP program would have a deleterious effect on them given that they care for a child seven years or younger.
  • Child Support Services: This program is meant to help caregivers to obtain legal agreements or court orders required to secure child support payments. If their spouse is delinquent in his/her payments, this program can help.
  • Universal Child Care Benefits: All Canadian families with young children are eligible for this benefit which pays $100 per child under the age of six.
  • Early Childhood Services and Special Needs: This supplement is geared specifically towards children under the age of six with a disability, who may be eligible for three years of early learning support

All of these benefits combined can be incredibly helpful to parents with a child who has a disability and support them in being more proactive parents.  

Is It Wrong To Get A Tax Refund?

Tax ReturnIt’s March, which can only mean one thing. All the green beer you could ever want to drink!!!

Or not.

It’s also the time of year many Canadians will begrudgingly start working on their taxes. If you’re anything like me, tax time is a myriad of forms, paperwork, and other tedium I really should have gotten around to in October. But here we are.

For most of you reading this, tax time isn’t so bad. Chances are you only have income from one source (your job), or maybe another source like a side hustle or investment returns. Add on a slip for your RRSP contribution, and that’s about it. Spend an hour on Turbotax and you’re done.

The average Canadian also overpays during the year — by design, since the last thing the government wants is to have to hound everyone for taxes at the end of the year — to the tune of more than $1,000, a pretty big chunk of change.

For years, the same advice has been given to taxpayers. Instead of getting a fat refund at the end of the year, you should opt for less tax taken off at the source and enjoy that money year round. If your refund is $1,200, wouldn’t you much rather have $100 extra per month? After all, there’s value in having money now compared to a year from now.

While that’s true, I’m of the belief that, for most people, it doesn’t really matter. Here’s why it’s okay to have a tax refund.

Pros aren’t really pros

Think of it this way. For the sake of simplicity, let’s divide people into two groups, even though real life doesn’t work that way. We’ll call them the financial studs and duds. The studs are maxing out retirement accounts, living frugally, and so on. The duds are doing everything wrong.

Let’s assume both groups get a tax refund each year. The studs do smart things with it, while the duds spend it on green beer and other silly things. Would that really change if each group of people had the tax refund to spend in equal increments over the year? I’m guessing not.

In fact, I’d even argue that the duds of the world are more likely to do something smart with the cash if it all comes in one big lump sum. There’s a huge psychological benefit to paying off a quarter or a third of your credit card at once, while many people wouldn’t even bother throwing $100 per month extra at it because it doesn’t feel like they’re doing anything.

The other anti-tax refund argument is that having the cash now is more valuable than having it later. For the most part, this is true. In theory, you could invest that cash for a few months and end up with gains.

But in reality, putting $100 per month in the bank at 1% interest gives you a whole $6 extra per year compared to the person who gets it all back at the end of the year, since you’d slowly be depositing it over the year. You’ll forgive me if I don’t get excited over that. You could make gains higher than that in the stock market, but those are hardly guaranteed.

But saying all that, I am in favor of you getting rid of your tax refund. Just not in the way you’ve been taught.

A better plan than getting a tax refund

There’s a really easy way for you to minimize your tax refund in 2015. All you have to do is earn more money.

I’m not talking about getting a raise at work, although that’s not a bad idea either. Instead, leverage your skills into a profitable side hustle. You’ll make income that isn’t taxed at the source, which will eat up your tax refund. Just be sure to figure out the tax implications of your side income so you’re not running into a different tax problem — being short.

There are other advantages to having a side hustle. You can write off part of your house as a home office, and chances are you can write off anything from a portion of your vehicle expenses or internet as well, depending on the nature of your business. You’ll make extra cash and cut down on your expenses.

There are hundreds of reasons why having a side hustle is a good idea. Using it to avoid getting a huge tax refund is just icing on the cake.

photo by: