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Changes to the Canada child tax benefit in COVID-19

With the COVID-19 pandemic continuing to disrupt most of the world, many of us have more questions than answers. Being in lock-down is stressful and tiring, and with no idea of when some sort of normalcy will be restored, it can be anxiety-inducing.

If you have children in your care, the government of Canada has increased the Canada Child Benefit for May 2020. Depending on your income, you could receive up to $300 extra per child as a one-time benefit. There are a few things you should know about this benefit, so let’s take a look at some of the fine print.

What is the Canada Child Benefit (or CCB)?

If you have an eligible child under 18 years of age in your care, the Canada Revenue Agency provides you with a monthly tax-free benefit. This benefit is intended to help you with the cost of raising a child. You can register to receive the CCB online, by mail, or when the birth of your child is registered.  If you need to apply for the CCB, you can do so here.

Who is eligible for the Canada Child Benefit?

  • You live with a child under 18 years of age
  • You’re the child’s primary caregiver
  • Must be a resident of Canada for tax purposes
  • You or your spouse are a Canadian citizen, permanent resident, protected person, temporary resident who has lived in Canada for 18 months and have a valid permit in the 19th month, or are an Indigenous person.

If you’re a single parent or are living separately from the child’s other parent, you are still eligible for the CCB. In most instances, the parent who has primary custody will receive the benefit. If the child spends her time equally between the two parents, the benefit will be split evenly among them.  Should a child be temporarily spending more time with one parent than another, the parent with whom they’re residing now will be eligible for the entirety of the benefit for that period.

If you’re taking care of foster children, be aware that you’re not eligible for the CCB during months in which you are receiving the Children’s Special Allowance (CSA).  For more information on eligibility for the CCB, consult the Government of Canada’s website.

How much will I receive from the Canada Child Benefit?

The amount you receive from the CCB is determined annually, calculated each July based on your previous year’s income tax return. To learn how much you’ll receive, the government looks at your adjusted family net income, the number of children you have, the age of those children, and your marital status.

If your adjusted family net income is above $31,120, the amount you receive will decrease incrementally. Similarly, if your child is between 6 and 17 years of age, you’ll receive a reduced benefit than if she is under 6.

How much will I receive from the Canada Child Benefit in COVID-19?

The amount you’ll receive for the COVID-19 benefit is based on your adjusted family net income for the year 2018. If you and your partner haven’t filed taxes for the year 2018, you will be ineligible to receive the benefit.  If you’re late filing your return, we recommend doing so as soon as possible, as you may still qualify for retroactive benefits and tax credits.

NOTE: To obtain the COVID-19 child care benefit, you don’t need to file your taxes for 2019. Your 2019 return will be used to determine the benefits you receive for 2020-2021.

How will I receive the COVID-19 top-up?

If you already receive the Canada Child Benefit, you will get the COVID-19 top-up in the same fashion. The top-up will be applied directly, and you can expect to receive the additional amount on your May CCB cheque or direct deposit. As mentioned above, if you want to receive the benefit, both you and your partner (if applicable) must file your income tax for 2018.

How do I apply for the COVID-19 top-up?

If you already receive the Canada Child Benefit, you don’t need to do anything: the top-up will automatically be applied to your May 2020 payment. If you don’t receive the benefit, you can apply online or by mail.  As long as you meet the eligibility requirements and have filed your 2018 income taxes, you will receive the benefit.

Do I need to claim the COVID-19 child benefit on my taxes?

Like the Canada Child Benefit itself, the COVID-19 top-up is tax-free. You won’t be required to claim it on your income taxes for 2020.

What should I do with the COVID-19 child benefit?

The purpose of the Canada Child Benefit is to help ease the financial burden with raising a child. The COVID-19 top-up is intended to supplement the CCB during these extraordinary times.  With children needing to be home from school, and parents finding themselves faced with layoffs, the top-up can serve any number of purposes.  From purchasing essentials like food and clothing to buying devices that can aid in education such as computers or internet access, the top-up should help your child.

If you’re in a fortunate position where you don’t require the CCB top-up, you can use the extra money elsewhere. Donating the amount to a charity in your community can help a family that needs it. If extra money in the future is essential, consider contributing it to your Tax-Free Savings Account (TFSA) or invest it in a Guaranteed Investment Certificate (GIC). By doing either of these, you can remain confident that the money will be accessible to you at a future date. TFSAs and GICs can be great options if you are looking to invest the money for a shorter time.

If you’re looking for a long-term investment option, a High-Interest Savings Account (HISA) offers a higher than average rate of return than a basic savings account.  Alternatively, you can contribute the CCB to your Registered Retirement Savings Plan (RRSP), or put it towards your child’s Registered Education Savings Plan (RESP). Both of these options allow you to invest the money for long-term benefits, but any withdrawals you make from these investments will be taxed unless the proceeds are used towards specific government initiatives.

The bottom line

The Canada Child Benefit top-up is part of the Government of Canada’s COVID-19 Economic Response Plan. The intent of the tax-free benefit is to aid families through these trying months by helping to ease the financial loss they may experience as a result of the pandemic. If you have questions regarding the Canada Child Benefit, speak to your financial advisor or visit the Government of Canada’s website for more information.