Do you live in Canada and have dependants? Don’t forget to claim your tax deduction. Most Canadians know that spouses and children qualify as dependants with the CRA (Canada Revenue Agency). Did you know, however, that under certain circumstances other family members, like parents, can count as dependants too?
What are the rules for claiming dependants on taxes in Canada? Let’s dive into the CRA’s qualifications for eligible dependants.
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Dependant Tax Credit: An Overview
The following family members count as dependants for tax credit purposes:
- Spouse. You can claim the spousal tax credit if your spouse’s net income does not exceed a certain limit ($13,808 in 2021). If your spouse is dependant because of physical or mental impairments, you may claim an extra $2,295. This caregiver amount is valid for both marriages and common-law partnerships.
- Child. Children under 18 are dependants for tax purposes. Older children may count as dependants if they have a physical or mental handicap.
- Parent or grandparent. You may claim an elderly parent or grandparent as a dependant provided that the person shares your household and depends on your care. Only one person can claim a specific dependant. E.g., if your ageing parents live with you and you provide care to your disabled father, either you or your mother may declare your father as a dependant.
Who Can Declare a Child as an Eligible Dependant?
When claiming dependants on taxes in Canada, you may qualify for the tax credit for a child if:
- You are single, divorced, or (in some cases) separated
- The child lives with you
- You do not pay child support
If both parents share custody, either of them (but not both) can claim the dependant tax credit. The parents must agree on who declares the child as a dependant. If the parents can’t reach an agreement, neither of them can claim this particular deduction.
Please note that the Canadian government offers tax credits for parents of minor children, separately from dependant tax deductions. You may also check with your local jurisdiction to see if you qualify for province-specific child tax benefits or child disability benefits.
Children Over 18 and Tax Credits
All children under 18 count as dependants if they live with you permanently. But what about college students who may depend on their parents for tuition, living expenses, and health insurance?
If you’re funding your child’s post-secondary education, you may claim tuition costs for tax deduction purposes. Please note that if your adult child has any income, they need to file their tax return before you claim yours. Students typically have a low income, so their parents may expect a significant tax deduction.
Do I Qualify for Dependant Tax Credit?
To make it easier for Canadian taxpayers to estimate whether they qualify for a dependant tax credit, the CRA suggests you answer the three following questions.
- During the tax year, were you single (unmarried, divorced, or widowed) or separated while supporting and living under the same roof with an eligible dependant in a household you maintained.
The CRA does not necessarily require legal separation for a dependant tax credit. Suppose you and your spouse or partner live in different households and maintain a complete financial separation. In that case, the CRA considers you separated for dependant tax credit purposes.
A child usually needs to share a household with their parent to qualify as that parent’s dependant. However, if a child moves away to attend school, the CRA still considers them as sharing a household with the parent if they live with the parent while not in school (e.g., during summer breaks).
- What is your family relationship with the dependant?
The CRA allows taxpayers to claim parents, grandparents, children, grandchildren, and siblings as dependants. Children, grandchildren, and brothers or sisters usually must be under 18 to count as dependants unless they have a physical or mental handicap. Disabled persons may count as dependants with no age limit.
The CRA recognizes blood, marriage, common-law partnership, or adoption family ties as valid for dependant tax credit purposes.
- Does your situation fall under any disapproved category for claiming a dependant?
The CRA has provided a list of circumstances that would disqualify a dependant tax credit claim, including two parents with shared custody both declaring their child as a dependant.
What Else Should I Know About Claiming Dependants for Taxes in Canada?
Here are a few other things to keep in mind if you plan to claim a tax credit for a dependant:
- If the CRA approves your claim of a dependant, you may be eligible for a non-refundable tax credit.
- The dependant tax credit may reduce the tax amount you pay for the particular tax year. However, unlike with refundable tax credits, you would not be eligible for a government cheque if you have a negative taxable income.
- Each household is only eligible to claim the tax credit for one dependant, even if several people under the same roof could qualify for the dependant tax credit. E.g., if a taxpayer claims spouse or common-law partner tax credit, they are not eligible to claim a tax credit for another dependant relative, like an elderly parent.
- Different rules may apply for people who had been declared bankrupt, immigrated to Canada, or emigrated from Canada during the tax year.
What If My Relationship Status Changed During the Tax Year?
If you and your spouse or common-law partner separated in the course of the tax year, and you have a child who lives primarily under your roof, you may be able to claim that child as a dependant. However, you can only do so if you refrain from claiming spouse or common-law partner support amounts. Calculate which amount would be higher and file a claim accordingly.
What if I Temporarily Reside Outside Canada?
Canadian citizens or permanent residents who temporarily leave Canada to work or travel abroad may still count as factual residents for tax purposes.
Factual residents must maintain residential ties in Canada even while they are abroad. If they qualify, factual residents may claim all relevant tax deductions that would have applied to them if they had lived in Canada year-round.
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