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Thread: Tax Credit

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    Default Tax Credit

    I have no idea what this actually means, but DH's financial guy sent it around at work:

    Tax changes to child tax credit and exemptions

    Federal tax changes effective July 1, 2007
    In the March 19, 2007 Budget, the Federal Government introduced a new $2,000 child tax credit for children under 18 years of age at the end of 2007. If a child born in 1990 or later resides with both parents throughout the year, either parent (but not both) may claim $2,000 per child. Any unused portion can be transferred to that parent's spouse or common-law partner. If the child does not reside with both parents throughout the year, the parent who is entitled to claim the amount for an eligible dependant can claim the child amount.

    In addition, the exemption amount for an eligible dependant and the amount for the spouse or common-law partner increased from a maximum of $7,581 to a maximum of $8,929.

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    Ali
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    I just heard this too and if you look at the government website it's on there already. Yeah!!

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    This info was sent around where I work too. I also have no idea what it means! LOL

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    In tax language it means a savings of about $310 in income taxes owing for every child you have under the age of 18. The credit is a non-refundable credit (like you get for CPP, EI, medical expenses, tuition etc.). If you don't have any income you can transfer the credit to your spouse / partner who does.

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    M2M
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    lol I must say I still do not get it....could you maybe draw a picture? or explain it to me as if I was 5?

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    Another way of thinking about it is that the credit completely offsets the Harper money ($100/M) you get for each child ---- now you can think of this popcorn and beer money as completely free and clear yours!!!

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    Do you know who gets to claim it? I supposed my tax accountant will know all the rules that apply. I also get that thing for having my child in a paid soccer program that started this year (for next year's income tax return)! w00t!

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    Quote Originally Posted by happymommy
    In tax language it means a savings of about $310 in income taxes owing for every child you have under the age of 18. The credit is a non-refundable credit (like you get for CPP, EI, medical expenses, tuition etc.). If you don't have any income you can transfer the credit to your spouse / partner who does.
    Will this be better for the higher or lower income to claim????Or are there specific rules???? I know question already asked. I am just too tired to think about it.........sweet deal!
    TIA.

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    Cool! I think. Right?
    LondonMoms has really gone downhill, ever since they started chit chatting in the home and garden forum. There is a place for chit chat, people!!!

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    My accountant said to ignore the notice. Yeah, sure you might start getting a little more money in your pocket now, but maybe you'll also get a smaller refund next spring?
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    I honestly can't remember whether it's the higher or lower parent (if you're living together) --- I'm one of those accountant's that takes the entire summer off of work so I'm in complete vacation thinking mode these days --- I suspect it's the lower simply because CRA likes to keep their tax revenues as high as possible BUT because it's a non refundable credit the reduction in taxes is flat at 15.5% of $2000 for each child so it technically doesn't change the FAMILY payable if the higher claims it. There isn't much detail on the CRA website as of yet. I'd initially go off the assumption the lower has to but you can't quote me on that!

    Most people won't likely see a change in their paycheque after July 1st for this credit simply because payroll departments are required to use your "TD1" (one of the forms you filled out when you were first hired that told your employer what your typical tax deductions were which then dictates how much tax they withhold each paycheque). For lots and lots of years now the number of children you have has never impacted / changed the total taxes you owe each year and the majority of people fill out this form on their first day of work and forget about it.

    If you do nothing right now (ie. don't fill out a new TD1 form) you won't notice a change in your paycheque (that is until you reach the CPP/EI maximum) and you'll get a slightly LARGER refund next spring. It's really not a huge deal (unless you've got say 10 kids) because the credit works out to about $310 per child in your tax savings .... so relatively speaking it isn't worth a whole lot of effort to change your tax planning right now.

    Having said that ---- I always like to remind people to consider filling out either a new TD1 with any kind of change in your situation or to send a letter to CRA each fall requesting approval to reduce your taxes withheld by your employer if you've got regular child care expenses, regular RRSP contributions (seperate from the ones you make through work), regular tuition fees etc. I do this myself every October which means I don't usually get big refunds in the spring but my paycheques are much bigger each month giving me more cash to put away in savings or against the mortgage / eat away / vacation away / etc.

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