Are You Prepared for the Family Tax Cut?
When the announcement broke about the family tax credit it created a lot of excitement for many tax payers. It seems though it is not as cut and dried as it first appeared to be and not nearly as beneficial as what was initially thought.
There are other highlights to the new tax news this year which focuses around the family tax relief, but the only one affecting the 2014 tax year is the income splitting section. That means the focus should be on this as we are now in the 2014 tax filing season.
You can forget about this tax break if you….
Are a single parent family
Both you and your spouse are in the same tax bracket
You have no children.
Also, the credit is capped off at $2,000.
Plus, you should know…
There won’t be any provincial tax savings with this family tax credit. It is not the same as pension income splitting, but is actually a notional transfer of income and not a split.
The size of your family is not going to award you any greater credit. You can have one child or five under the age of 18 and it won’t make any difference in your credit.
In order to take advantage of the credit both you and your spouse must file your 2014 returns and be Canadian residents.
If you and your spouse are splitting pensions then this could not be done if you want to take advantage of this current credit.
If you or your spouse have claimed bankruptcy then the year in which this is done will not be eligible for this new credit, for either you or your spouse.
If a child resides with both parents throughout the year, only one of the parents can claim the credit.
Before becoming overly excited about any new tax announcement it is always wise to let the dust settle, and wait until the critics have made their voices heard. Then you can get a good picture of the good, the bad, and the down right ugly circumstances evolving around it if any exist.
Then you have to wait to see how complex the new tax regulation is going to be to implement it and decipher whether it is going to have any impact on you.
This is one of the great advantages of using a good accountant. These professionals get right on top of any new tax reg. or ruling right away so they can gain a good understanding of how it is going to affect their clients and how to utilize it to their best advantage.