Canadian parents across the country received a summer bonus on July 20, when back payments from the new Universal Child Care Benefit (UCCB) were deposited in their bank accounts.
Although the intent of the UCCB is to help parents pay for child care, or to afford to stay home with children, those in the accounting industry have warned parents to set some of that money aside, since the changes will have an effect when families go to do their taxes next spring.
The federal government has increased the UCCB payments by $60 a month on all children under the age of 18. Formerly, the benefit was $100 a month for children six and under. The government also introduced a new $60/month benefit for children from seven years old to 17 years old. This translates to an added $720 per child, per year for Canadian families.
But, what many parents don’t consider is that “that whole $720 (increase) is taxable,” according to Richard Jean, a partner at JMD Group LLT, in St. Paul. He says that another important thing to consider is that the federal government has also removed the Child Tax Credit on tax returns.
The net result of the removal of the tax credit, combined with the UCCB increase does result in an overall modest increase for families, however, Jean notes, “When you take all of that into account . . . you’re only going to be ahead in that range, between $60 and $275 (for the whole year).”
He said his office has received some questions about the increase, and the average taxpayer is still learning about the changes.
Overall, Jean says parents should “realize that the money you’re getting is taxable.” Come April, depending on a family’s tax situation, a portion of the money will be going back to the government, either through a lower tax refund being received by that family, or a higher amount owed on taxes.
In 2006-07, the federal government decided to start the UCCB payments, rather than go with a national daycare program that would only benefit certain families, says Westlock-St. Paul MP Brian Storseth.
“We believe that it should be parents that make the decisions on where the money goes,” when it comes to childcare, he says.
He says that because the government balanced the budget this year, the overall plan is to continue to give Canadians their taxes back, and the UCCB increase is an example of doing that.
“You need to start putting the money back to where it belongs,” says Storseth. “At the end of the day, I can tell you as a parent . . . as a person who lives in a community and deals with lots of kids . . . who are playing sports . . . who have mouths to feed . . . every dollar counts.”
Storseth doesn’t support a national daycare strategy, since he believes it would benefit mostly people in Eastern Canada and in large urban centres, not rural communities like St. Paul.
He says that so far, he has heard good feedback on the increase and the July 20th back payment.
“People are very happy about it.”
When parents were asked for their opinion via social media, reaction was mixed, with some parents giving an enthusiastic thumbs up for the fact they now receive extra funds for children over six, while others took issue with the fact the new deal may not look as good come tax time, with one calling it a “definite ploy.”
Lori Stokes, program coordinator for the St. Paul Child Care Society, says she understands the point of giving money directly to parents to choose how they want to use it, but points out some of the pitfalls with this method of payment delivery.
With Alberta’s minimum wages set to increase over the next three years to $15/hour, daycares will have to start charging more to parents to cover their costs, and she wonders if parents will need a higher subsidy payment to make ends meet.
“In our situation, we find that parents don’t make the best choices with their finances,” she said, noting paying for child care comes after priorities like paying rent or mortgages, or getting groceries – however, child care providers still need to get paid for the work they do, Stokes points out. She feels that if the government were to pay directly for childcare spaces, which are in high demand in St. Paul particularly for infants, it would simplify the process.
“It’s nice to give the parents that freedom and flexibility, but I don’t know if that’s the best choice.”
