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SEPARATED IN 2016?

HERE IS HOW TO HANDLE YOUR TAXES ALONE

  • Marital status: For tax purposes, your marital status is determined on December 31 of the tax year. So if you are separated on December 31, 2016, you would put “separated” as your marital status. If you were in a common-law relationship, you are only considered separated if the period of separation lasts 90 days or more, so if you separated on December 1, you will not be considered separated on December 30 unless you remain separated on March 1.
  • Inform the CRA: Breaking the news to the Canada Revenue Agency may not be high on your list of priorities. However, since your GST/HST Credit and Child Tax Benefit is now based solely on your income, it will usually be to your advantage. Use Form RC65 Marital Status Change to advise them and they will recalculate your entitlement effective for the next payment date.
  • File a Return: You will have to file a tax return in order to continue receiving the GST/HST Credit and Child Tax Benefit for the next benefit period.
  • Claim the Spousal Amount one last time: If you supported your spouse or common-law partner while you were together, you can still claim the spousal amount for one last time. The credit will only be reduced by the amount he or she earned before you separated.
  • Child Support and Alimony: If your ex is paying child support, it is not taxable to you. Nor can they claim a deduction for it. However, periodic spousal support payments are taxable to the recipient and deductible to the payer as long as they are made pursuant to a court order or written separation agreement.
  • Deadbeat Parents: If you fall behind with your child support obligations, you may find that the amount owing is withheld from your income tax refund.

TAX TIPS FOR THE SINGLE PARENT

  • Eligible dependants: Single parents are allowed to claim $11,327, the amount for an eligible dependent (previously referred to as equivalent to spouse) for one of their children. You have to support your child in a dwelling which you live in and maintain.
  • Joint custody: If there are two children and the parents share joint custody, then each parent can claim the equivalent to spouse amount for one child. But if you are required to pay child support, you cannot claim this credit.
  • Child Tax Amount: Effective for 2016, this credit has been eliminated and replaced with the enhanced Universal Child Care Benefit.
  • Child Tax Benefit: This benefit is calculated by your household income level so the amount you receive depends on your earnings. The rates and amounts vary by province but in general, if you earn more than $43,953, the CTB amount will decrease until it goes to zero at around $116,253 (with 2 children). There is also a supplement for lower-income families earning between $25,584 and $43,953. In joint custody situations, the benefit is split.
  • Child Support: If your agreement is dated after May 1, 1997 then child support payments are neither taxable nor deductible although you do need to report them on your tax return.
  • Child Activities: The Children’s Fitness Amount can be claimed by either parent but cannot exceed $1,000 in total per child. Beginning in 2011, there is also a Children’s Arts Amount of up to $500 per child.
  • Universal Child Care Benefit: Effective for 2016, the Universal Child Care Benefit (UCCB) has been enhanced as follows:
    • For children under the age of six it has been increased from $100 to $160 per month, and
    • A new benefit of $60 per month has been paid for children over the age of five and under the age of 18
    • Amounts received under the Universal Child Care Benefit program is considered income, however if you are single the government now allows you to report this as income for the child you are claiming as an eligible dependent.
  • Child Care: Child care expenses can add up but you must have receipts from your daycare or babysitter. If you are paying a family member to look after your children, this can be claimed as long as they are 18 or over and provide a receipt with their SIN. They will also need to report this income on their tax return. Effective for 2016, the maximum dollar limits in the calculation of the deduction for child care expenses will all be increased by $1,000 as follows:
    • From $7,000 to $8,000 for children under 7;
    • From $4,000 to $5,000 for children aged 7 to 16 and infirm children over 16;
    • From $10,000 to $11,000 for disabled children
  • Changing status: If you move in with the other parent of your child, you are considered common-law for tax purposes immediately. If you move in with someone else, you are only considered common-law after you have lived together for a year. If you get married or become common-law, you need to report the change to the Canada Revenue Agency using a RC65 Form. This will affect your ability to claim the eligible dependent amount as well as your Child Tax Benefit calculation.
  • Claiming dependants: Once a child turns 18, they are no longer considered a dependant for tax purposes even if you continue to support them. The only exception is infirm children.

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Contact

Rhonda Cockwill CPA, CGA of Rhonda Cockwill Professional Corporation is accepting new corporate and personal tax clients. She would happily take the stress out of taxes for you. Book your appointment today by calling 403-851-2002 or emailing [email protected].

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