In Canada, having a dependent can provide several tax benefits that can help reduce the amount of income tax you owe. Do you support someone financially? If so, you might be able to claim them as a dependant on your taxes. You’ll pay less tax, and who doesn’t like that? CRA offers credits for you as a Canadian taxpayer to lower your taxes by claiming an eligible deduction for a dependant.
Tax deductions can play a significant role in helping families reduce their overall tax burden. They may lower your taxable income, resulting in a lower tax bill. Additionally, tax deductions could help you maximize your tax refund and receive more money back from the government. Tax deductions may benefit families in offsetting costs associated with raising children, such as childcare, education, and medical expenses.
You’d be surprised at who can be named as a CRA-eligible dependent. In addition to a spouse or child, you may be able to get a tax break for a parent grandparent, or other relatives. Of course, there are a lot of rules governing this so read on for details.
Who is an Eligible Dependent for Tax Purposes in Canada?
Under the Dependent Income Tax Act, the Government has started the CRA Eligible Dependent program. This is for the people who are caring for dependents such as young children, older people, or disabled ones.
You may qualify for the dependent tax credit if the person you live with relies on you for financial and physical support. That said, there is no one-size-fits-all approach to who a dependant is. 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 ($15,705 for 2024.). If your spouse is dependent because of physical or mental impairments, you may claim an extra $2,499 for 2024. This caregiver amount is valid for both marriages and common-law partnerships. To claim the Canada caregiver amount for your spouse or common-law partner, their net income must be less than your basic personal amount (or your basic personal amount plus $2,499).
- Your children or grandchildren (biological, adopted, or stepchildren). 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. For example, if your aging parents live with you and you provide care to your disabled father, either you or your mother may declare your father as a dependant.
- Brothers or sisters (includes brother-in-law and sister-in-law
- Nieces, nephews, aunts, or uncles
To claim the dependant tax credit for one of these people, you need to meet all of the following conditions:
- Neither you nor your spouse or common-law partner was supported or being supported by that person.
- You supported a dependant in the current tax year.
- You lived with the dependant in a home you maintained. That means you cannot claim the Canadian caregiver credit for someone who visited you.
The Most Popular Dependent Tax Credits
Here are some of the key tax benefits available:
1. Canada Child Benefit (CCB)
The Canada Child Benefit is a tax-free monthly payment made to eligible families to help them with the cost of raising children under 18 years of age. The amount you receive depends on the number of children you have, their ages, and your family income.
2. Child Disability Benefit (CDB)
If you have a child under 18 with a disability, you may be eligible for the Child Disability Benefit, which is an additional monthly payment provided on top of the CCB.
3. Eligible Dependant Credit
If you are single, divorced, separated, or widowed, and support a dependent who lives with you, you may be able to claim the Eligible Dependant Credit. This credit is similar to the spousal amount and can significantly reduce your tax payable.
4. Caregiver Amount
If you support a spouse or common-law partner, or a dependent with a physical or mental impairment, you may be eligible for the Canada Caregiver Credit. This credit can be claimed for:
- An eligible dependant 18 years of age or older who is not your spouse or common-law partner.
- Your or your spouse's or common-law partner's child under 18 years of age with an impairment in physical or mental functions.
- An eligible spouse or common-law partner, or your child under 18 years of age.
5. Child Care Expenses Deduction
You can deduct childcare expenses incurred to allow you or your spouse or common-law partner to earn income, attend school, or conduct research. The amount you can claim depends on the child's age and whether they have a disability.
6. Tuition and Education Amounts Transfer
If your dependent child is a student and does not need to use all their tuition, education, and textbook amounts to reduce their own tax payable, they may transfer the unused amounts to you. This can reduce your tax payable.
7. Medical Expenses
You can claim eligible medical expenses for yourself, your spouse or common-law partner, and your dependents. This includes a wide range of medical costs that are not covered by insurance.
8. Adoption Expenses
If you adopt a child, you may be able to claim eligible adoption expenses for the adoption process. The maximum claimable amount is adjusted annually for inflation.
9. Registered Education Savings Plan (RESP) Contributions
Contributions to an RESP are not tax-deductible, but the investment income earned within the plan is tax-sheltered until it is withdrawn. Additionally, the government provides grants and bonds to help with education savings.
10. GST/HST Credit
The GST/HST credit is a tax-free quarterly payment that helps individuals and families with low and modest incomes offset all or part of the GST or HST that they pay. Your eligibility and the amount you receive are based on your family's net income and the number of children you have.
11. Canada Workers Benefit (CWB)
The Canada Workers Benefit (CWB) is a refundable tax credit intended to supplement the earnings of low-income workers. If you have a dependent, the amount you receive may be higher.
Determining Eligibility for Dependant Credits in Canada
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.
1. How you are related to the dependent. A wide variety of people can be claimed as a dependent. Here’s the CRA list:
“Your parent or grandparent by blood, marriage, common-law partnership, or adoption;
your child, grandchild, brother, or sister by blood, marriage, common-law partnership, or adoption and was under 18 years of age or had an impairment in physical or mental functions.”
That last part is very important. You can claim a dependent tax credit for someone who is over 18 if they have a disability. There is no age limit.
2. Were you at any time in the tax year single, divorced, separated, or widowed and supporting a dependent who lived with you in a home that you maintained?
However, before you answer “Yes” or “No” be sure to read the conditions on the CRA site: “If you had a spouse or common-law partner, but you were not living with, supporting, or being supported by that person, the CRA considers that you were separated for this amount.” In other words, even if you are not legally separated you may be able to claim a dependent tax credit.
In addition, there are circumstances where the dependent may not be living at your home and you can still be eligible. Here’s what the CRA says: “Your dependent may live away from home while attending school. If the dependent ordinarily lived with you when not in school, the CRA considers that dependent to live with you for this amount. For this claim, your child is not required to have lived in Canada but still must have lived with you. This would be possible, for example, if you were a deemed resident living in another country with your child
3. Does your situation fall under any disapproved category for claiming a dependant?
The CRA has provided a list of circumstances that would disqualify a dependent tax credit claim
- You or someone else is claiming a spouse or common-law partner amount for this dependent
- The person for whom you want to claim this amount is your common-law partner.
- Someone else is claiming an amount for this dependent. If you and another person can both claim this amount for the same dependent (such as shared custody of a child) but cannot agree on who will claim the amount, neither of you can make the claim.
- Someone else in your household is making this claim. (Each household is allowed only one claim for this amount, even if there is more than one dependent in the household.)
- The claim is for a child for whom you had to make support payments. However, if you were separated from your spouse or common-law partner for only part of the year because of a breakdown in your relationship, you may be able to claim an amount for that child if you do not claim any support amounts paid to your spouse or common-law partner on your return. Claim whichever is better for you.
When Can’t You Claim the Dependent Tax Credit?
There are several instances where you cannot claim dependant tax credits, even if you meet all of the criteria.
- If you take care of a dependant but the house you live in is maintained by your parents or someone else, you cannot claim the Canada Caregiver Credit.
- If your grandfather is dependent but your grandmother claims the spouse credit, you cannot claim her as a dependant.
- You can only claim for one dependant, regardless of the number of dependants in the house.
- If someone is claiming an amount on their taxes for a dependant you cannot claim the same person.
- If you are required to make child support payments and the other parent is not required to, you cannot claim the amount for the eligible dependant (child). Only the parent who does not pay child support can claim the amount. If both pay, you have to decide who will be making the claim. If you cannot, the CRA will reject the claim for both parents.
What Else You Need to 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. For example, if a taxpayer claims a 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 to people who have been declared bankrupt, immigrated to Canada, or emigrated from Canada during the tax year.
How to Get Eligible Dependent Benefits?
- The details of the dependent have to be submitted via the application form. Whether they are mentally unwell or are minors or maybe an older citizen. The applicants have to pass the tests that include join return, resident, and taxpayer test.
- The factor that is also considered is the total number of dependents that a carer has. All the details have to be shared with the CRA-concerned officials.
What If Your Relationship Status Changed During the Tax Year?
If you and your spouse or common-law partner separated in 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 You 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.
Maximize Your Tax Return by Filing Taxes
Every year, we’re faced with filing our taxes. For some Canadian citizens, it could be daunting to figure out how to optimize their tax returns. Fortunately, the Canadian government offers a variety of tax credits that can help families reduce their overall tax burden.
With the cost of living on the rise, understanding tax definitions and any benefits you can claim could help you with your living expenses. Filing Taxes accountants we’ll provide professional guidance on what tax deductions are available to you and highlight which ones you may be eligible to claim to maximize your tax return.
Feel free to reach out to Filing Taxes at 416-479-8532. Schedule an NTR engagement appointment with us and take the first step toward proper management of your finances and ensure you comply with CRA reporting and payroll deductions.
Disclaimer: The information provided on this page is intended to provide general information. The information does not consider your personal situation and is not intended to be used without consultation from accounting and financial professionals. Salman Rundhawa and Filing Taxes will not be held liable for any problems that arise from the usage of the information provided on this page.