Jamie Golombek: The CCB can be used strategically intended for long-term savings, taking advantage of government grants including a special exception to the money attribution rules
In this week’s Fall Economic Statement, Funding Minister Bill Morneau announced a growth to the Canada Child Advantage (CCB) payments, indexing them to air pump as of July 2018. This comes a couple of years ahead of plan when indexation wasn’t slated to begin right up until July 2020, but, as the government stated, “a growing economy as well as improved fiscal track usually means the Government can deliver with this commitment two years sooner.”
You’lmost all recall that the new CCB method replaced the old system with the Canada Child Tax Bonus (CCTB) and the Universal Child Care Benefit (UCCB), which were combined as of July 2016.
The CCB is a non-taxable benefit that is compensated monthly and is based on modified family net income and the quantity of children in your family. As you move the old CCTB was also tax-free and income-tested, a UCCB, while taxable, was not income-tested.
The federal says that under the new CCB method, which is targeted at low- and middle-income young families, 9 out of 10 individuals are receiving more than they does under the previous benefit program and received, on average, more or less $2,300 more in rewards, tax-free. Nearly two thirds of families getting the maximum CCB amounts are simple parents, of whom 90 % are single mothers. Those with the highest incomes, however, are now receiving lower than under the old system.
The latest maximum amount of CCB per youngster under age six is actually $6,400, which is scheduled to enhance to $6,496 for 2018/2019 (based on a One particular.5% inflation adjustment) and a projected $6,626 maximum for 2019/2020 (based on a predicted 2% inflation rate). The maximum amount intended for older children, aged 6 through 17, is currently $5,400, climbing to $5,481 (2018) and $5,591 (2019). These levels are reduced based on household income. On average, families benefitting in the CCB receive about $6,800 in CCB payments annually.
While many mother and father will certainly use the majority of the CCB monthly payments to help pay for kids’ daily living expenses, the CCB can also be used strategically regarding long-term savings, taking advantage of government grants and also a special exception to the revenue attribution rules.
Top up kids’ RESPs
If you’re not already maximizing additions to your child’s Registered Knowledge Savings Plan, using the CCB repayments to do so can effectively offer a guaranteed rate of come back of 20 per cent (up to an annual maximum of $500 per child) because the contributions will be eligible to the Canada Education Financial savings Grant (CESG). If you took about $200 each month from your CCB payment and also directed it to an RESP, you’ll collect the full $500 in CESGs designed for(i.e. 12 A $200 X 20 per cent). In addition to, if you haven’t previously maxed on prior years’ CESGs, you can make contributions even more of your monthly CCB fee and catch up on the CESGs retroactively, as much as an annual limit of $1,One thousand of CESGs per child, depending on their age.