Tax Benefits (2022 – 2023) for having a Dependant in Canada

Do you support someone financially? If so, you might be able to claim them as a dependant on your taxes and get a break on your taxes for the 2023 tax year. You’ll pay less tax, and who doesn’t like that?

The CRA offers credits for you as a Canadian taxpayer to lower your taxes by claiming an eligible deduction for a dependant. There are many options for who you can name as your CRA eligible dependant, and claiming dependants has many benefits.

So, you can list your child or spouse, but you might choose to get a break on your taxes for your nana or mom if they live with you. Let’s look at the rules, so you can decide who to choose to get the maximum tax benefits for dependants this year.

What Are the Tax Benefits of Claiming Dependants?

If you are a single taxpayer without a spousal credit and you care for a relative, such as children, parents, or grandparents, you can claim a dependant and receive a non-refundable tax credit. A non-refundable tax credit directly reduces the tax you pay. But it doesn’t mean you get a refund cheque. Your taxes can’t go below zero for a non-refundable tax credit. However, claiming a dependant can reduce your income tax liability to zero!

Plus, you can only claim a single dependant, no matter how many children or adults you support. Also, your household can only claim one tax benefit for a dependant, even if you have more dependants or other people who can claim a dependant.

So, if you have a spouse, 3 children, and your mother living in your household, you’ll need to make a choice. If your mom has a pension, her income might be enough to disqualify her as a dependant. In that case, one of your kids (the one without a job) is likely the best choice. Let’s take a look at the details.

Determining Eligibility for Dependant Credits in Canada

The CRA asks 3 questions to determine eligibility for dependant credits in Canada.

1. How are you related to your dependant? Several relationships are the basis for dependant claims. Here’s the list from CRA:

Your dependant can be your grandparent or parent by blood, marriage, common law, or even by adoption. A dependant can also be your child or grandchild, sister or brother – also by blood, marriage, or common-law, or even adoption as long as they are under 18 or have a mental or physical disability. The dependant tax credit has no age limit for anyone with an eligible disability.

So Who Is Considered a Dependant?

You have the option to choose to claim your dependant tax credit on:

• Your Spouse: The Spousal amount applies if your spouse has a net income under $13,808, which is the 2021 basic personal exemption. This non-refundable tax credit is subtracted from your taxable income. Plus, you claim the additional credit of $2,350 if you have a spouse with an eligible physical or mental disability. So, if your spouse is home with the kids or has a part-time job, they could be a great choice for a dependant.
• Your Parent, Grandparent, Brother, or Sister: If your relative lives with you and is dependant on you financially, you might be allowed to claim dependant credits for them. Only one of you in the household can claim each dependant’s credits.
• One of Your Children: You can claim the dependant tax benefit for any of your children up to 18 years old. After they turn 18, you may claim them if they have an eligible physical or mental disability. Your child doesn’t even need to live with you while they go to school to be eligible. Just as long as yours is their permanent address, you can choose to claim them for your dependant. And only one parent can claim the child. If you and the child’s other parent separate, claim the tax credit only if the child normally resides with you. If you make child support payments, that child is not an eligible dependant.

Your dependant credits claim is reduced by the amount your dependant earns. So, if they have a job or pension, do their tax return before you do your own. That way, you’ll know how much to claim for them on your return.

2. Were you single, separated, divorced, or widowed while you supported a dependant who lived with you in your home?

Always read the description on the CRA website to be sure you answer correctly. For example, if your partner did not live with you, you didn’t support them, and they weren’t supporting you, that’s the definition of “separated” as far as the CRA is concerned. So, you don’t need any sort of legal separation to still claim the dependant tax credit.

Also, sometimes your dependant does not need to live in your home to be eligible. For example, your dependant might live in residence away from home while they attend university. But suppose they ordinarily live with you outside of the school year. In that case, the CRA concedes that your dependant “lives with you” for the dependant credit purpose. Your dependant doesn’t even have to live in Canada, as long as they lived with you before. This is possible, of course, if you live in another country and live with your dependant.

3. In addition, the CRA has several rules against claiming a dependant like:

• When you or anyone else is already claiming the spouse or common-law partner tax credit amount for this dependant
• Claiming the dependant amount for your common-law partner.
• When more than one of you is eligible to claim the dependant, you have to decide between you who will get the tax benefits for the dependant. For example, suppose you share custody of a child. In that case, you must agree on who claims the tax benefit or CRA will decide that neither of you gets the tax benefits for the dependant.
• Each household only makes one claim for the tax benefits for dependants amount, even with more than one dependant in the house.
• Claiming a child you make support payments for. But there is a proviso on this one. If separated for only a part of the year, you might be allowed to claim a dependant amount for the child if you don’t claim child support when you return. Choose whichever is better for your situation.

Child Tax Credits

In addition to a spousal-type tax benefit for dependants, the Canadian tax system also offers a child tax credit. A child under 6 years old has a maximum tax benefit of $6,997. Kids aged six to 17 have a maximum benefit of $5,903. For those who share custody of the children, the child tax credit splits 50-50. If your child lives with a physical or mental disability, CRA offers a child disability tax credit in addition to the basic amounts.

Also, some Canadian provinces have child tax benefits. Filingtaxing.ca accountants will adjust your taxes to maximize the tax benefits of claiming dependants in your province.

Maximize Your Tax Return with

Filing Taxes can help you figure out how the tax benefits for dependants works out in various scenarios. Our professionals consider the laws in your jurisdiction to ensure that you receive the maximum benefits of claiming dependants regardless of where you live in the country. If you would like a tax accountant to file your return, book a call with our tax expert to file your taxes from start to finish. Experts at Filing Taxes will be happy to assist you in this pursuit. To speak with an experienced accountant, contact Filing Taxes either at 416-479-8532 or [email protected] Schedule an NTR engagement appointment with us and take the first step towards proper management of your finances.

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.