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How the Canada Child Tax Benefit and the Child Disability Benefit Operate – A Canadian Tax Lawyer Explains

What are the Canada Child Tax Benefit and Child Disability Benefit?

The Canada Child Benefit (CCB), also referred to as the Canada Tax Benefit (CTB) or Canada Child Tax Benefit, is a tax-free payment made by the Canada Revenue Agency (CRA) every month to eligible families. This payment is intended to help Canadian families raise their children who are under the age of 18. It includes the Child Disability Benefits and the federal and provincial and territorial programs, as well. If an individual has already applied for the federal Canada Child Tax Benefit, they automatically apply for the provincial benefit and the Child Disability Benefit.

The Child Disability Benefit is part of the Canada Child Benefit program. It’s a tax-free monthly payment administered by the Canada Revenue Agency. However, as the name suggests, this payment is only provided to children under the age of 18 with severe and prolonged impairment in physical or mental function. To qualify, the child must qualify for the Canada Child Benefit and for the disability tax credit.

The Criteria to Qualify for the Canada Child Tax Benefit

To qualify for the Canada Tax Benefit, an individual must meet all the following criteria:

  • Live with a child under 18 years of age;
  • Primarily responsible for the care and upbringing of the child;
  • Canadian Tax Resident; and
  • Both the individual and their spouse must be one of:
    • Canadian citizen;
    • Permanent resident;
    • Protected person;
    • Temporary resident who has lived in Canada the previous 18 months and has a valid permit for the 19th month; or
    • Indigenous person as per the definition of “Indian” under the Indian Act

If there’s a change to the recipient’s eligibility, such as the recipient emigrating and becoming a non-resident, it’s important to report it to the Canada Revenue Agency as soon as possible. If a person is no longer eligible under these criteria, payments will stop. Canada Child Benefits can also stop if a change is not reported. Further, those that don’t report something like a change in residency but continue to collect the Canada Tax Benefit are committing tax fraud—a crime with potential fines and jail time. An experienced Canada tax lawyer can help remedy this issue through the Voluntary Disclosure Program.

The Canada Child Benefit isn’t applicable for those with foster children where the Children’s Special Allowance is payable. But if there is no Children’s Special Allowances, an individual caring for a child under a close relationship program can receive Canada Child Tax Benefits.

Further, the Canada Tax Benefit (CTB) program is not automatic. To receive payments, an individual needs to apply for it. One should apply for the CTB when:

  • Their child is born;
  • A child begins to live with them or returns to live with them;
  • They begin, end, or change a shared custody;
  • They receive custody of a child; or
  • They meet the conditions listed above on who qualifies for the Canada Child Benefit.

However, if someone applies for the benefit 11 or more months after the child begins to live with them, they must provide supporting documents for

  • Their citizenship status;
  • Proof that they live in Canada;
  • Proof of birth for each child applying for Canada Child Benefits; and
  • Proof that they are primarily responsible for care of that child or those children.

It’s also important for an applicant to file their income taxes every year, even if you didn’t have any income. The amount they receive from the Canada Child Tax Benefit is partially determined by one’s household annual taxable income. Without a taxable income in a particular year, an individual may no longer be eligible for the Canada Child Benefit.

How Much Can Each Child Receive from the Canadian Child Tax Benefit?

How much someone can receive from the Canada Child Benefit depends on a number of factors. The easiest way to estimate an individual’s monthly payment is through the Canada Revenue Agency’s online calculator. Some factors include the age of the children, the number of children in care, a person’s marital status, and the income of the person’s household. The payable amount is recalculated every July to account for changes in these factors and for inflation.

If a pair of parents have shared custody of a child or multiple children, each parent will get 50% of what they would have received  if they had full custody, with their personal household income taken into account. If the child or children are mostly with one parent, then that parent will be deemed to have full custody. Custody status of the parents can change, however.

Due to the on-going COVID-19 situation, the government of Canada increased the payment of the Canada Child Benefits for May 2020. Depending on the income of the household, some families may have received up to $300 extra per child as a one-time benefit.

Tax Tips from an Experienced Canadian Tax Lawyer on the Tax Implications of the Canadian Child Benefits

Although the Canada Child Benefit may not seem like an obvious tax issue, it’s still administered by the Canada Revenue Agency. Whenever you have an issue with the Canada Revenue Agency, it’s advised to seek out help from an experienced Canadian tax lawyer.

For example, if the Canada Revenue Agency has overpaid your Canada Child Tax Benefit, they may keep all or part of your future benefit payments, your future income tax refunds, or your goods and services tax/harmonized sales tax credits until the amount owed is repaid. This can result in the withholding of money to which you’re entitled. Further, the Canada Revenue Agency can reverse prior benefits and credits going back several years and charge interest and penalties. This can result in an enormous tax liability.

To fight against the Canada Revenue Agency, you’ll need legal representation from a top Canadian tax lawyer who knows how to work with the Canada Revenue Agency to resolve your issue. A professional Canadian tax lawyer understands what your legal rights are and what the Canada Revenue Agency can or cannot do. We can ultimately help you when you’re denied benefits, get a reduced amount without explanation, or have money held back by the Canada Revenue due to overpayment of benefits.

Disclaimer:

"This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions you should consult a lawyer."

FAQ'S

The Canadian Children’s Special Allowance program is the mechanism used by the government to provide funds to agencies and institutions that take care of children. These payments are made to federal and provincial agencies. But it is possible to arrange for these payments to be made direct to foster parents. In most cases, this allowance is not taxable.

Four factors are used to calculate how much Canada Child Benefit (CCB) you are entitled to. They are – how many children you are caring for, the age of those children, your marital status, and your adjusted family net income (AFNI). Given the fact that all of these factors can vary from year to year, the amount paid changes frequently.

The disability tax credit (DTC) is a mechanism that the CRA uses to reduce the amount of tax people with disabilities and those supporting them have to pay. It is used to address the fact that many disabled people face higher day to day costs than most other citizens do. For example, having to pay for specialist equipment. Once someone becomes eligible for DTC, they may also be entitled to other tax breaks.

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Child Tax Benefit & Child Disability Benefit | Rotfleisch & Samulovitch PC
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