It’s been awhile since I have written a post. The whole raising children, being on City Council, transitioning into an exciting new career, renovating one house and moving into another has well… It’ has kept me busy to say the least.
But as the UCCB back payments begin, I have many friends and family members asking me how the UCCB benefits them. Previously, I wrote an article clarifying the difference between the National Child Tax Benefit and the Child Tax Credit, as at the time of the decision, the government’s release of information was unclear. Families were relieved to hear that they were not losing their National Child Tax Benefits and would receive an additional amount of benefit.
The question now becomes how much of a benefit will families be seeing? Below you will find a series of mathematical equations that may hurt your head just a tad. However, I ask that you walk through it slowly and stay with me, as I walk you through the changes you’re experiencing and how it will affect each family differently.
We’ll start with rewinding just a bit and explaining the changes that apply to both married and single parents:
- You are no longer entitled to the Child Tax Credit when you file your return.
- You are now receiving an increased Universal Child Care Benefit (UCCB) of $60.00 per month per child under the age of 18 years.
Previous to the UCCB increase, parents received a Child Tax Credit for each child under the age of 18. You would have seen it on your taxes as Line 367.
“Line 367 – Amount for children born in 1997 or later
You can claim $2,255 for each of your or your spouse’s or common-law partner’s children who are under 18 years of age at the end of the year.”
Federal Personal Tax Credits are valued at 15% of the deductible amount. I have broken down the amounts for each child up to five children below. This is an annual amount (and so the math starts):
# of Children: Line 367 Amount x Federal Deductible Benefit = Your Previous Tax Credit
1 Child: $2,255 x 15% = $338.25
2 Children: $4,510 x 15% = $676.50
3 Children: $6,765 x 15% = $1014.75
4 Children: $9,020 x 15% = $1,353
5 Children: $11,275 x 15% = $1,691.25
Technically you wouldn’t see this money until tax time. Of which, you may or may not get back, depending on how much taxes you owed. However, the amounts stated above could be considered cash in your pocket at the end of the year, if you paid your taxes accordingly. This is a tax credit, so there is no tax on this money received. It really did not require any careful budgeting to the average family.
As of 2015, Parents will no longer see these amounts deducted from their taxes. Instead, they will receive an additional $60.00 per month for each child under 18, ($720.00 annually) above and beyond what you have been receiving.
# of Children: Increase in UCCB You’ll Receive this Year
1 Child: $720.00
2 Children: $1440.00
3 Children: $2160.00
4 Children: $2880.00
5 Children: $3600.00
The UCCB has always been a taxable benefit. This isn’t new. Since its introduction, you have been paying taxes on it. But since you are getting more, you will be paying more taxes. How much taxes you pay depends on your tax bracket, which I have included here:
Federal Tax Rates
- 15% on the first $44,701 of taxable income, +
- 22% on the next $44,700 of taxable income (on the portion of taxable income over $44,701 up to $89,401), +
- 26% on the next $49,185 of taxable income (on the portion of taxable income over $89,401 up to $138,586), +
- 29% of taxable income over $138,586.
BC Provincial Tax Rates
5.06% on the first $37,869 of taxable income, + 7.7% on the next $37,871, + 10.5% on the next $11,218, + 12.29% on the next $18,634, + 14.7% on the next $45,458, + 16.8% on the amount over $151,050
In 2013, British Columbians working full-time earned an average weekly wage of $1,020.54, compared to the national average of $1,013.92. The average hourly wage for full-time employees in the province was $25.73. B.C.’s minimum wage is $10.25 per hour (WelcomeBC.ca) For arguments sake, I am going to use this average annual income of $53,040 to do some math.
Since this amount is topping up your income, we will use the highest reached bracket for this earner:
7.7% Provincial Tax and 22% Federal Tax = 29.7% Total Tax
This means that the additional funds this earner receives will have to pay 29.7% taxes on it. So here is the math on each for our average earner:
# of Children: UCCB x Tax Rate = Total Taxes Payable
1 Child: $720.00 x 29.7% = $213.84
2 Children: $1440.00 x 29.7% = $427.68
3 Children: $2160.00 x 29.7% = $641.52
4 Children: $2880.00 x 29.7% = $855.36
5 Children: $3600.00 x 29.7% = $1069.20
Remember, this isn’t your employer. Your employer deducts these taxes from your income as the year goes on. The government does not do this for you. At the end of the year, you will owe the amount stated above. So after you do the math, put the amount away for safe keeping. You should have already been doing this for any UCCB you currently receive, so that there’s no surprises come tax time.
We will take the amount they receive in UCCB and deduct the amount they are taxed. This will be the benefit received by the average BC earner. Again, I’ll do it for all five situations:
# of Children: UCCB- Taxed Amount = Total Discretional Amount (The amount you should spend)
1 Child: $720.00 – $213.84= $506.16
2 Children: $1440.00 – $427.68= $1012.32
3 Children: $2160.00 – $641.52= $1518.48
4 Children: $2880.00 – $855.36= $2,024.64
5 Children: $3600.00 – $1069.20 = $2,530.80
Though we have the total resulting benefit, we still have the argument of whether or not the average BC earner is benefitting. As I stated above, there is no longer a Child Tax Credit. So we must take into consideration that you no longer receive those amounts back in deductible credits. So let’s do our final mathematical equation. We will remove the loss of the tax deduction from the final UCCB benefit being received:
# of Children: Discretionary Amount – Loss of Child Tax Credit = Total Amount of Benefit of Last Year
1 Child: $506.16 – $338.25 = $167.91
2 Children: $1012.32 – $676.50 = $335.82
3 Children: $1518.48 – $1014.75 = $503.73
4 Children: $2,024.64 – $1,353 = $671.64
5 Children: $2,530.80 – $1,691.25= $839.55
I recognize that I have stated a whole lot of numbers here, so I am going to now restate it as simply as possible:
This is the increase that you will see, due to the UCCB, over last year if you were the average earner in BC. If you earn less, you will see a larger increase. If you earn more, you will see a smaller increase. Though these increases and decreases are not significant. However, there does come a point for higher income earners where this change starts “costing” family money due to the removal of the tax credit. Thankfully, the government allows the lower income earner claim this credit. Also, add that families now have income splitting if they have children. So the lower income earner would have to be making $100,000 per year before it starts to cost an intact family anything.
# of Children: Total Amount of Benefit Over Last Year
1 Child: $167.91
2 Children: $335.82
3 Children: $503.73
4 Children: $671.64
5 Children: $839.55
So is the average British Columbia (or Canadian) benefitting from the increased UCCB? Yes, but maybe not as much as they’d like you to think.
Is it the answer to child care issues across British Columbia (Canada), in regards to escalating costs and lack of child care options? Probably not. Then again, as a mother of three I am paying close attention to potential promises from all candidates and quite frankly I am disappointed with the lack of creativity and the clear disconnect between fiscal responsibility, practicality, and the average Canadian family.
It is important to note that I have not written this to encourage you to vote or not vote for any party. I have written this to encourage British Columbians (all Canadians) to take the time and educate themselves on the financial workings of the government, the decisions they make, and how it affects you. Know your tax rate. Know how it affects your income. Pay attention to what each government is offering you, and know how it affects your family.
But most importantly, educate yourself and vote in this next election. Don’t vote for a party because your husband, wife, mother, father, brother, sister, or best friend has told you to vote for a party. Read the newspaper, visit political party websites, ask questions, and investigate. That is how you will make an informed decision in the 2015 Federal Election. That is how you will get the best government for YOUR family.