On October 9, 2014 the Federal government made good on an April 2011 election promise and increased the Child Fitness Tax Credit to $1,000 from the previous maximum of $500.
This means that effective January 1, 2014, you can now claim up to $1,000 annually for your child’s fitness expenses, and 15% of those expenses (up to $150) will be the amount of your tax credit. In the case of an individual with a child with a disability, the limitation on expenses is increased to $1,500 (equivalent to a tax credit of $225).
Then, in 2015, this credit will become a refundable tax credit. Currently, the credit is non-refundable, meaning that it can only decrease your total tax owing and would never result in a refund from CRA.
Take the example of a low-income family who – without the child fitness tax credit – owed $0 in taxes for both 2014 and 2015. In both years, they spent $1,000 annually on their children’s fitness programs, which equals a $150 tax credit under the new guidelines. In 2014 – while the credit is non-refundable – their return will still show $0 taxes owing and they will not get any refund. However, when the credit becomes refundable in 2015, they will get a refund of $150.
It is important to note that this is a Federal credit and there is no indication so far that the provinces will mirror these changes. In addition, the Children’s Arts Tax Credit remains unchanged.