Putting the Canada Child Benefit to the test

Those with household income less than $140,000 win under new plan

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Despite all the press and expert analysis, more than a few Canadians had questions regarding how the Canada Child Benefit will work.

Using our Canada Child Benefit calculator, we examine how this new non-taxable benefit really works and offer some insight into the questions you had about the CCB.

Putting the Canada Child Benefit to the test

The Liberals explained their decision to scrap CCTB and UCCB and replace it with the Canada Child Benefit by stating that: “Canada’s existing child benefit system is complicated, consisting of a tax-free, income-tested Canada Child Tax Benefit with two components (the base benefit and the National Child Benefit supplement) and a taxable Universal Child Care Benefit received by all families, regardless of income. It is a system that is both inadequate (it does not provide families with the support they need) and not sufficiently targeted to those who need it most (families with very high incomes receive benefits).”

How the budget will affect families »

Starting in July 2016, families will receive the Canada Child Benefit (CCB)—a refundable credit based on family net income. According to Budget 2016, the new CCB will provide a maximum benefit of $6,400 per child under the age of six and $5,400 per child aged six to 17. While the Liberals anticipate this new benefit will help more than nine million Canadians, they expect that most Canadian families will see an average increase in child benefits of almost $2,300 each year.

The winners and losers of the Canada Child Benefit »

To appreciate whether or not families will really benefit from the CCB, we decided to take your questions and answer them using our Canada Child Benefit calculator. Here’s what we found:

Scenario 1: What benefit can a single parent who earns $10,000 per year and has two children under the age of 6, expect to receive? — Jessie, via moneysense.ca

If you’re a low-income parent, you will definitely benefit from the Liberal’s new CCB plan. Based on Jessie’s scenario, this parent would actually receive $1,630 more per year under the CCB for a maximum of $12,800 per year, compared to just $11,170 that he or she would’ve received under the former CCTB and UCCB plan.

So, for this low-income parent, the new plan puts an extra $1,066 per month in their pocketbook (as opposed to the old plan which only gave them ($930 extra per month).

Scenario 2: What benefit can a single parent, who earns $30,000 per year, with two children under the age of six, expect to receive? — Jessie, via moneysense.ca

Now, here’s where it gets interesting. Under the old child tax benefits, a single-parent of two kids under age six, earning an annual income of $30,000, would only get $10,334 or $861 per month. But under the Liberal’s new CCB, this parent would receive $12,800 each year—an increase of $205 per month when compared to the old plans.

Scenario 3: What benefit can a family with a combined annual income of $70,000, and one 13-year-old child, expect to receive? — Mike, via moneysense.ca

A family that earns a net household income of $70,000 and is raising a teen can expect an extra $102 per month under the new CCB, for a total annual benefit of $2,790.

Scenario 4: What can a single parent, with a $30,000 annual income and three children (aged 6, 9 and 13), expect to receive from the new Canada Child Benefit? One child qualifies for the Disability Tax Credit.  — Natasha, via moneysense.ca

In this scenario, the parent can expect 1,350 per month from the Liberal’s new CCB plan, for a total non-taxable benefit of $16,200 each year. Under the old plan, this parent would’ve received $11,816—or $4,384 less each year.

Also, because there is one child that qualifies for the Disability Tax Credit, this parent will continue to receive the Child Disability Benefit with the addition of up to $2,730, per year, for each eligible child.

Scenario 5: Family that earns $80,000 and raising two children, both under the age of 6.

Under this new plan, the more you earn the less you’ll get in CCB benefits—but that does not mean that you’ll have less in your pocket.

For instance, if your family’s net annual income was $80,000, you would’ve received $5,431 per year in CCTB and UCCB benefits. Plus, you would’ve had to pay tax on the UCCB portion of those benefits.

Under the new plan, your family will receive $7,220 each year in non-taxable benefits—almost $1,800 more than the old plan.

(If your children are older than six and younger than 17, your CCB benefits drop to $5,220 per year, but that’s still $2,189 more than what you would’ve received under the old plan.)

Scenario 6: Family that earns $120,000 and raising two children, both under the age of 6.

If your combined family income jumps into the six figures, you’ll continue to see a clawback of the CCB benefits. Under this scenario, the family would receive $411 per month in CCB payments versus the $320 per month they would’ve received under the old plan.

Scenario 7: Single earner with $300,000 in annual income raising two kids between the ages of 6 and 17. — James, via moneysense.ca

Sorry James. You won’t get a red cent under the new Liberal plan. While the old plan would’ve paid you $1,440 to help defray the costs of a raising three children, under the new CCB you won’t be eligible to receive any benefits. Keep in mind, though, that even under the old plan, a portion of that money was taxable.

For anyone that would like to run their own calculations, you can use our Canada Child Benefit calculator. The calculator lets you input your province of residence, each parent’s gross annual income as well as the number of children under age six and between the ages of six and 17. In case you wondered, our calculator takes into consideration both provincial and federal marginal tax rates.

At incomes of $140,000 per year, families start to break even

According to our CCB calculator, a family will break even with the CCB as soon as one spouse earns between $140,000 and $150,000 each year. In this earnings bracket, the family would receive roughly the same amount from the CCB as they would have under the old CCTB and UCCB plans.

This changes again if the annual income is split between two parents. For instance, if each spouse in this family were to earn $70,000 each, the CCB would still provide almost $1,200 more each year in non-taxable benefits (assuming two kids under the age of six). In fact, a dual-income family doesn’t actually break-even on the CCB until each spouse is earning about $80,000 in taxable income each year.

Your questions about the CCB answered

Q1: Will the new child care benefit be paid out retroactively from January 1, 2016? — Mordechai, via moneysense.ca

No. The Canada Child Benefit (CCB) will replace the former Canada Child Tax Benefit (CCTB) and the Universal Childcare Benefit (UCB) starting in July 2016.

Q2: How will the benefit be split if parents are divorced and share custody of the children? — Christine, via Facebook 

Great question, Christine. Typically, tax repercussions of a separation or divorce are dealt with in the separation agreement. This agreement will include support to be paid, who pays what for child care expenses, and what each parent can claim when it comes to tax credits and deductions relating to their child(ren).

While some tax deductions and credits can be shared between you and your former spouse, others cannot.

As a rule of thumb, only one parent may claim the federal and provincial tax credits for an eligible dependant and for children born after 1995 (although, this tax credit may have been eliminated after 2014). It’s important to address who will get to claim these benefits as they can be fairly significant in helping to reduce taxable income. For instance, as a parent you could claim up to $11,327 as a federal tax credit for each child on your 2015 tax return. For more on this see the CRA’s site.

However, there are tax credits that both you and your ex-spouse can share. These include child care expenses and, presumably, the Canada Child Benefit. Under the former Canada Child Tax Benefit (CCTB) and Universal Childcare Benefit (UCB), parents could split the taxable benefits as long as they spent 40% or more time parenting their child(ren). That meant that each parent was entitled to at least 50% of the “baby bonus” money from the government. Moving forward, it appears the CCB will work the same way in shared-parenting arrangements, however, the onus is on the parents to sort out who claims what on their tax

We should point out that our analysis and calculations of the Canada Child Benefit versus the old CCTB/UCB plan do not give a complete picture when it comes to your taxes. Our calculator does not take into consideration the elimination of the Family Tax Cut (which allowed high income couples to save as much as $2,000 in taxes through income splitting), nor does it take into consideration the $225 tax credit ($150 from the Fitness Tax Credit and $75 from the Arts Tax Credit) that was eliminated in Budget 2016.

To truly appreciate all of the tax implications please talk to a tax specialist. Or, if you have questions about the CCB or other aspects of the federal budget, email us. We can be reached at: ask@moneysense.com or through Twitter @MoneySenseMag and on Facebook.

25 comments on “Putting the Canada Child Benefit to the test

  1. Hi there, I’m curious if they use net or gross combined income for these calculations? Any info would be helpful! Thanks

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    • Use gross income for these calculations as both the federal and provincial marginal tax rates are applied using our calculator.

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      • Well that is confusing as you referred to NET income numerous times in the article. For example, “For instance, if your family’s net annual income was $80,000..”

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        • Yes. Totally understand the confusion. Our calculator asks for GROSS income, as it calculates the provincial and federal tax for you. From this net income it then provides the CCB you are entitled to under the new plan.

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  2. The intent of this article is right, but the information is very poorly presented. In multiple circumstances, the entire benefit is referred to as “Extra” or “Additional”, when in fact it is the new total to be received.

    Examples:

    1) “For a low-income parent, the new plan puts an extra $1,066 per month in their pocketbook.” No, the new TOTAL payment is $1,066 per month. The incremental payment (based on the numbers presented) is $136 per month.

    2) “In this scenario, the parent can expect an additional $1,350 per month from the Liberal’s new CCB plan, for a total non-taxable benefit of $16,200 each year. Under the old plan, this parent would’ve received $4,384 less each year.” Again, the $1,350 per month is not “additional”. The “additional” portion, based on numbers presented, is $365.

    These are wildly important distinctions, and I was shocked to see this error repeated multiple times.

    Reply

    • Sven,
      Thanks for your comments. There are no errors in the calculations. The “extra” is the amount a family can expect from the new CCB plan based on the inputs provided. It’s not an extra amount in addition to UCCB & CCTB. It’s what this family could expect to receive based on the new CCB plan—in other words it’s the extra money they will get each month based on the CCB plan. Remember, the new CCB replaces both UCCB and CCTB. The extra from the UCCB and the CCTB is now eliminated.

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  3. In regards to single parents and their entitlement. Will the new child benefit take into consideration how much child support these single parents receive, which is also tax-free?

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  4. well right now ith an income of onlyu 1800 and a 3year old and a 17 year old we get 825 for cctb and 220 for utb so that is a total of 1045 per month and with the new one we get 983 per month where with the old pone we received a total of 1045. With an income of only 18,000 and this new benefit supposed to be giving low income familes more money how is us loosing $62 every month which is $744 efvery year how does that help us as a low income family. I would consider $18,000 low income enough but I put an income of only $8000 into the calculater right on the Canada revenue site and it came back with the same amount of benefits per month so I guess everyone who used to get the max of 1045 for one child under 6 and one child over 6 with a very low income is now getting 983 per month instead of 1045 . They are not helping us low income families they are hurting us and to top it all off we live in a very remote northern Ontario community where even a bag of milk is almost $8 and making us get less. Down south milk is as low as $4 and they get the same amount. I think they should give us back the money we were getting and maybe focus on low income families like they said they would and also maybe cost of living where you live should factor on but even if they don’t focus on where yo live DONT TAKE $744 FROMFAMILIES LESS THAN 22,000 income…. If I have calculated this wrong someone please let me kinow

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  5. I tried the calculator from the finance, and it come out as $533.00/- This is $50 less than currently I receive for my child benefit. Where is the benefit? It looks more like decrease in child benefit payment.

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    • Why are people having kids when they can’t afford them this is a big problem your taking from the ones that work hard everyday. Sad sad

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  6. Do we still have to pay tax on the first six months that was under the old plan? (Jan 2016 to June 2016)

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    • It appears you will. Since the new CCB plan will not be introduced until July 2016, the old taxable plan is still in place until then, meaning you get the old rates and you will get taxed on a portion of those benefits.

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  7. I find this whole thing inaccurate! Your “old” benefit numbers are only the CCTB payments, making it look like more or extra. However, as a low income mother of 3, I’ll be receiving $78 LESS than I did with CCTB & UCTB combined.
    To be accurate you need to test you scenarios with what they were receiving combined.. Then test your theories!
    Unless I’ve done my taxes incorrectly, there aren’t any benefits from the new CCB.

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  8. We are a single income family. With two kids aged 7 and almost 9. We get 330 right now cctb and uccb combined. When we filed our taxes I was told we would be getting 294 as of July. Which is less. So I dont see how anyone is getting more? We are no where near 100,000 a year. Yet when I use the calculators it tells me we should be getting somewhere near 500? Why all the differences??

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  9. how much would I get as a single parent with one child under the age of 6

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  10. oh shoot I meant say I only made $11,000 last year

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  11. I couldnt quite understand the part with the retroactive payments. Are we going to receive a lump sum at least for the first 6 months in july or no?

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  12. Hi! I saw some fine print on a different page and in looking for clarification, I wound up here. I did not see the answer so I thought I should ask.

    The fine print on the other page said:
    “This calculator does not yet include the additional amount you’ll receive if your child qualifies for the disability tax credit. This additional amount is up to $2,730 per child eligible for the disability tax credit and the phase-out of this additional amount will be made to generally align with the CCB.”

    I’m interested to know what this will mean to families who receive this credit? Just looking for clarification of what this refers to, as I was previously unaware
    TIA

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  13. Honestly , if you are making over 100,000 a year, you don’t need Government help!!!!! This should only be for people who earn less than 65,000!!!!!!

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  14. According to the calculator, we’ll be getting about $70 less per month. On a single household income of $35,000 annually, that’s quite a decrease. I don’t get the benefit in this at all. When living on a really tight budget like we do, this makes quite a difference!

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  15. Our Family income Is 120,000 and we have a Child who Is 7 years Old how Much benefit we Will receive ? Thank u

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  16. Our income has drastically decreased this year (job loss) from my calculations our income for 2016 will be approx $30000 less then 2015.
    If I contact CRA and let then know of this information would I be able to get my Child tax benefit adjusted and hopefully increased this July? We are really struggling and the extra money would really help.

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  17. Yah this article didn’t seem clear at all. I also just realized CCB isn’t here to help. I am a single parent to 1 child who will be 6 the end of 2016 and checking my cra account it shows an I will have an increase of 60$ (rounding up) from July 2016 until Dec 2016 but then I starting in Jan 2017 I will be getting 40$ less per month then I was July 2015 – June 2016 (not 40$ less from the new amt I get July-Dec 2016). Now with the way prices on food and clothes and other everyday items are going up I’m so confused to how this CCB is suppose to help. I am barely surviving now. And my annual income is 15K rounding up. And to the person who asked a question about getting support with an annual income of 120K I’m surprised you are even on here, because if your making 120K and requesting help what does it say about the rest of us making under 20K and 30K and some with 3 or 4 mouthe to feed. I really hope this is fixed sooner then later.

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  18. Why dont we get back pay? My benefit went up 70$$ so technically from Jan 1st is the start of a new year so I should have recieved a lump sum of 420 to make it up.

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  19. Have the fitness and arts credits being taken away included in the calculations? What about different marginal tax rates and the broken promise to make the new 33% rate revenue neutral?

    Reply

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