Children’s Activity tax credit, a break for parents

Hockey season has started, and for now, my wife and I are still just observers. But with three boys under the age of six, future fall seasons promise to be much more hectic — and costly!

It was therefore with a degree of selfishness that I took note of the Ontario government’s recent proposal for a new Children’s Activity Tax Credit.

Legislation was subsequently introduced, and the bill had gone to second reading as of September 30. This will put Ontarians on a similar footing with their cousins in Manitoba, Nova Scotia, Saskatchewan and Yukon. Predictably, some of the immediate press response to the proposal was that it was a bit of a deflection from the heat of the HST. Politics aside, and appreciating that this isn’t an earth-shattering amount, it’s nonetheless an encouragement for children’s development.

Under the proposed tax credit, parents would be able to claim up to $500 of eligible expenses per child. At the 10% base credit rate, that would result in a tax credit worth up to $50 per child, or up to $100 for a child with a disability.

Assuming passage of the bill, the credit is slated to apply to expenses incurred from 2011 onward. It is currently structured as a refundable credit, which is a positive for low-income parents who otherwise have no tax due. Note, however, that the calculated credit will be reduced proportionately for any reimbursement, allowance or assistance the parent does not include in income.

As well, the child care expenses deduction must be claimed first if an amount is eligible for both credits — that is, there’s no double-dipping — but any unused excess could be claimed under the activity credit.

On the disability front, if the tax credit for physical or mental impairment may be claimed with respect to the child, then the additional amount is available. Essentially, if at least $100 is spent on qualifying activities, then a further $50 credit may be claimed in addition to the amount calculated using the formula.

On the sporting/fitness side, the credit will be available where the program qualifies under the definitions for the federal children’s fitness amount tax credit.

Importantly, the Ontario credit will also cover non-fitness activities that might be better categorized under the banner of arts and other cultural activities: Instruction in music, dramatic arts, dance and visual arts; Language instruction; Activities with a substantial focus on wilderness and the natural environment; Structured interaction among children where supervisors teach or help children develop interpersonal skills; and Enrichment or tutoring in academic subjects.

All of this is especially good news in our household, as to this point we have one boy holding his stick by the blade, another analyzing its composition, and the littlest one preferring to chew on it.

The practicality for us is that we would be and are spending the money anyway, whether it’s on physical activities or other extra-curricular endeavours.

Still, at $50 apiece for this credit, plus the $75 on the federal level, that translates into $375 based on our three kids.

And by the way, there’s no maximum income threshold or clawback mechanism to reduce the credit, so we look forward to some welcome tax relief.