Don’t spend that extra cash just yet

The universal child care benefit will be taxed next April.

The universal child care benefit (UCCB) was introduced in 2006 as a taxable benefit designed to help Canadian families through direct financial support.

Parents have since 2006 been receiving a $100 taxable benefit a month for each child under age six.

On January 1, 2015, the UCCB was expanded to include a new benefit for children aged six through 17, and the payments that parents receive for children under the age of six were increased.

The payment is now $160 a month for children under six, and children between six and 17 are eligible for $60 a month.

Since payments are retroactive to Jan. 1, parents recently received $360 for each child six to 17 years old, for the first six months of 2015.

But don’t be so quick to spend that extra cash. According to a story published by the National Post, Canadians who received the payments can expect to see some of that amount taxed next April unless their income is so low that they don’t pay income taxes.

The benefit is taxable on the lower income earner in every household. However, Angella MacEwan, Senior Economist with the Canadian Labour Council, told the National Post that the lower income earner in some families will be moved into a higher tax bracket this year because of the government’s recent decision to allow income splitting. That will marginally increase how much they are asked to pay in taxes on the child care benefit, she said.

The increase in benefits, combined with the elimination of the child tax credit, will mean middle and upper-income earners will have more of the money taxed back at the end of the year than lower income households, said David Macdonald, Senior Economist at the Canadian Centre for Policy Alternatives, to the National Post.

“You get a cheque and it’s tangible. You have no idea what you’re going to pay back at the end of the year,” Macdonald said.

The universal child care benefit applies to all Canadian families regardless of income so long as they have children under the age of 18.