Parents and Spouses
Estate planning arrangements – Review annually to ensure that these arrangements meet their objectives.
Income splitting –
If you have cash to invest and a spouse or children in a lower tax bracket, consider an income-splitting plan. Income-splitting arrangements requiring a loan to a family member should be set up before January 1, 2011, to take advantage of the current prescribed rate (1% for the fourth quarter of 2010 and expected to remain 1% in the first quarter of 2011).
Interest on intra-family loans must be paid on or before January 30, 2011, to avoid attribution of income.
Income earned by discretionary inter vivos family trusts must be paid or made payable to beneficiaries by December 31, 2010, to be included in the beneficiary’s income.
If you own shares in a private corporation, discuss with your PwC adviser the use of a trust to split income with your adult children.
Registered education savings plan (RESP) –
Contribute to an RESP for your child or grandchild. For more information, refer to our Tax Memo, “Understanding RESPs.”
Plan for the RESP to receive the maximum lifetime Canada Education Savings Grant of $7,200, which depends on annual RESP contributions and the beneficiary’s age.
If you reside in Alberta, ensure the RESP receives funds from the Alberta Centennial Education Savings Plan (lifetime maximum of $800 per child).
If you reside in Quebec, ensure that the RESP receives the Quebec Education Savings Incentive, which has a lifetime maximum of $3,600.
Child care expenses –
Pay child care expenses for 2010 by December 31, 2010, and get a receipt.
Remember that boarding school and camp fees qualify for the child care deduction (limits may apply), as does the cost to advertise or use a placement agency to find a child care provider.
Universal Child Care Benefit (UCCB) and Canada Child Tax Benefit (CCTB) –
If you receive these benefits, invest the funds in a separate account in trust for your children. Investment income on these funds will not be taxable to you.
If you are a single parent and receive the UCCB, commencing 2010, you can include the UCCB in the income of a dependant for whom an eligible dependant
credit is claimed or, if the credit cannot be claimed, of a child for whom the UCCB was paid.
Registered disability savings plan (RDSP) – If your child qualifies for the disability tax credit and if RDSP assets or income will not disqualify your child from receiving provincial or territorial income support, you should:
set up an RDSP to qualify for Canada Disability Savings Bond (CDSB) payments (lifetime maximum of $20,000 per child);
contribute to an RDSP to qualify for Canada Disability Savings Grant (CDSG) payments (lifetime maximum of $70,000 per child);
plan to optimize the lifetime CDSG paid to an RDSP by taking into account annual CDSG limits, which depend on net family income; and
be aware that enhancements to RDSP rules: allow a rollover of a deceased individual’s RRSP proceeds to the RDSP of a financially dependent infirm child or grandchild, for deaths occurring after March 3, 2010; and allow a 10-year carryforward of CDSG and CDSB entitlements, starting 2011.
Children’s fitness tax credit – Claim this federal non-refundable tax credit on up to $500 of fees paid per child under 16 for enrolment in a physical activity program. Different rules apply for children with disabilities. Manitoba and Yukon have parallel credits, Nova Scotia has a similar credit, and Saskatchewan provides a refundable tax credit for children aged six to 14 for cultural, recreational and sports activity fees. Recent enhancements in:
Ontario, commencing 2010, proposes a similar credit to the federal credit, except that Ontario’s is refundable and applies to a wide range of activities including sports, arts and other cultural activities; and
Manitoba, commencing 2011, expand its credit to individuals aged 16 to 24.
Pay the expenses by December 31, 2010, and retain receipts.
Employment leave by spouse – If your spouse is leaving the workforce, time contributions to and withdrawals from a spousal RRSP to provide your family with extra disposable income.
Children abroad – Consider whether your will and estate plan need to be updated for children who no longer reside in Canada.
Private health services plan (PHSP) premiums – If you are self-employed, determine whether PHSP premiums you paid can be deducted from your self-employment