Child Tax Benefit, does it offset Section 7?

[BluePat]

Hi all,

I'm curious as my ex seems to want to "rack up" the Section 7 expenses at will, but if she gets a huge chunk of her portion back at tax time, does that make well for me too?

Any and all info welcome.

[SingingDad]

I have actually been looking into this myself recently, and the short answer is yes... if there is a tax benefit associated with the expense (ie medical expenses, child's activity amount, child's art amount) it should be considered with the benefit. My interpretation is that the tax benefit is taken of the top and the rest is shared. Also (I actually asked this in this same forum a few days ago) Benefits paid from CCRA for the child is included as income for apportioning the s. 7 expenses.

Here are the relevant sections from the Guidelines (if I'm understanding your question correctly).

From: Family Law Act - O. Reg. 391/97

Subsidies, tax deductions, etc.
(3) Subject to subsection (4), in determining the amount of an expense referred to in subsection (1), the court must take into account any subsidies, benefits or income tax deductions or credits relating to the expense, and any eligibility to claim a subsidy, benefit or income tax deduction or credit relating to the expense. O. Reg. 159/07, s. 2.

And from: Family Law Act - O. Reg. 391/97

Special or extraordinary expenses
3.1 To calculate income for the purpose of determining an amount under section 7 of this Regulation, deduct the support, not including child support, paid to the other parent or spouse and, as applicable, make the following adjustment in respect of universal child care benefits:
(a) deduct benefits that are included to determine the parent or spouse’s total income in the T1 General form issued by the Canada Revenue Agency and that are for a child for whom special or extraordinary expenses are not being requested; or
(b) include benefits that are not included to determine the parent or spouse’s total income in the T1 General form issued by the Canada Revenue Agency and that are received by the parent or spouse for a child for whom special or extraordinary expenses are being requested.

[BluePat]

Thanks for your reply.

The reference your quoted is for Ontario, however I'm in Alberta, so it might be somewhat different here...

[SingingDad]

From the pdf of the alberta guidelines: http://www.qp.alberta.ca/documents/Regs/2005_147.pdf

Schedule 3 Page 22.

"Special or extraordinary expenses
4 To calculate income for the purpose of determining an amount
under section 7 of these Guidelines, deduct the spousal or adult
interdependent partner support paid to the other parent and, as
applicable, make the following adjustment in respect of universal
child care benefits
(a) deduct benefits that are included to determine the parent’s
total income in the T1 General form issued by the Canada
Revenue Agency and that are for a child for whom special
or extraordinary expenses are not being requested, or
(b) include benefits that are not included to determine the
parent’s total income in the T1 General form issued by the
Canada Revenue Agency and that are received by the
parent for a child for whom special or extraordinary
expenses are being requested."

I couldn't find a correlating section for the one that says tax deductions must be considered, but you can read the specifics on page 5 of the PDF.

[Mess]

There are constant references to using NET cost, which means after tax refunds are considered. Look for that phrase. Sorry I didn't have time to go through them myself this morning.

[SingingDad]

Took another look and here is what I was looking for on page 7

"(3) Subject to subsection (4), in determining the amount of an
expense referred to in subsection (1), the court must take into
account any subsidies, benefits or income tax deductions or credits
relating to the expense, and any eligibility to claim a subsidy,
benefit or income tax deduction or credit relating to the expense."

Both sections are exactly the same.

[Mess]

This is a common question, I'm going to sticky it. Thanks SingingDad for the research.

[SingingDad]

Not to get this thread off topic, but one problem I have is that parts seem to contradict each other, specifically regarding the UCCB.

The UCCB is issued by the CRA and is supposed to offset Child care expenses for children under 6. To me it makes sense that it is included since Child care is a s. 7 expense and it's issued by CRA. but Section 7 (4) explicitly says it's not included.

[Mess]

It's not really dedicated to child care. It is issued to all families, even if there is a stay-at-home parent, or if the children are cared for by grandparents during the day, etc. Familiies that have no child care costs still receive the benefit.

The only thing that ties the benefit to child care is the name. There is no legal obligation to dedicate it to daycare fees. Thus, the benefit is included in total income, just like the CCTB.

[SingingDad]

But then what does 7 (4) mean?

Universal child care benefit
(4) In determining the amount of an expense referred to in subsection (1), the court shall not take into account any universal child care benefit or any eligibility to claim that benefit. O. Reg. 159/07, s. 2.

[Mess]

The previous subsection (3) states that:

(3) Subject to subsection (4), in determining the amount of an expense referred to in subsection (1), the court must take into account any subsidies, benefits or income tax deductions or credits relating to the expense, and any eligibility to claim a subsidy, benefit or income tax deduction or credit relating to the expense.

Subsection (4) states that the UCCB is an exception to that, and will not be applied directly to calculation of the expense. It is still added to income.


I'll try to be clearer: If you have 20k income and the gross amount of child care is 8k. You would receive (ballpark) 4.6k in CCTB and 1.2k UCCB. The child care is 50% subsidized, and for my example the subsidy is paid to the parent. The parent would have 8k in receipts but we have to apply the subsidy. It usually doesn't work that way, but this is for illustration...

1. The 1.2k UCCB is taxable income in the eyes of CRA and is added to the 20k.
2. The parent would have 8k of gross child care, minus 4k in subsidy, so net child care is 4k.
3. Child care is further reduced by the tax benefit. At 21.2k, the marginal tax rate is about 20%. The average tax rate is about 10% The child care would receive a deduction at the 20% rate, so should be reduced by that amount.
4. Final net child care is therefore 3.6k.
5. CCTB is now added to line 150 to determine the amount used for proportionate split of the expense. This gives 25.8k for the calculation of the split.
6. Assuming the other parent's income is 75k, you are looking at a 26/74 split.

This is assuming there aren't any other factors affecting line 150, or other benefits or deductions involved. I rounded and ballparked some figures; it is just for illustration.

[SingingDad]

Thank you that does make more sense.

Basically UCCB is still included as income for section 7 expenses, but it is not attributed to any specific expense.

Now if I could only get my STBX to disclose all the pertinent amounts it would be great. I have estimates, but that's it.

[Moolight]

In this thread, nobody mention the factors in the calculation.

Canada child tax benefit/related provincial and territorial benefits calculator

UCCB is taxable and only for children under 6 yr of age to a maximum of 100/month.

CCTB is base on the income and given to the primary care provider and if you declare you have share custody, you only received half. The other parent will received the other half base on his salary meaning if it is higher, he will get less than the parent with the lower salary.

Situation scenarios will influence greathly and i do not beleive that you can easily do those calculations.

If you beleive you are entitle to it because of sharing custody, you should file the RC66 form RC66 - Canada Child Benefits Application

[Mess]

Moonlight, that is actually the calculator I used for my example, so those provincial credits are factored in. In any case, I don't present it as 100% accurate, just an illustration of how to factor in the credits and deductions that are applicable to your situation.

[BluePat]

Thanks so much everyone, especially SingingDad for the elaboration on page 7, that nails it as far as I can tell!

It's truely sad when your ex's legal respresentation tries to use tactics that circumvent the truth or acuality of what is in effect, the right and honest way of compensating your ex for expenses incurred on behalf of the child. Another way to put it is, the ex's lawyer advocating deception and cheating to obtain settlement...

Thanks again!