Tax Planning for Ontario Parents: A Practical Guide for 2024 Filing

As 2024 draws to a close, Ontario parents should start preparing for the upcoming tax season. Whether you welcomed a new baby this year or have children heading to university, understanding your tax benefits and obligations now can make filing much easier when tax season arrives in early 2025.

Taking Stock as 2024 Ends

With just weeks left in the tax year, now is the crucial time to ensure you’ve maximized your family’s tax position. The Canada Child Benefit (CCB) continues to be a fundamental support for families, with maximum annual benefits reaching up to $7,850 for children under six and up to $6,629 for children aged 6-17. These amounts vary based on your family income, which makes December an ideal time to estimate your annual income and understand how it might affect your benefits.

Many families don’t realize that December decisions about overtime, bonuses, or self-employment income can significantly impact their CCB for the coming year. Taking time now to review your income situation could help optimize your benefits for 2025.

New Ontario Parents: Your Baby’s First Tax Year

Welcoming a new child brings joy, sleepless nights, and yes – tax implications. Beyond the immediate need to register for the CCB, new Ontario parents should understand how their leave benefits affect their tax situation. Parental benefits are taxable income, and the standard 10% tax withholding often isn’t enough to prevent an unwelcome surprise at tax time.

Digital record-keeping has become increasingly important, especially for medical expenses related to childbirth and early care. For 2024, the CRA accepts digital copies of medical receipts, but they must be clearly legible and include all relevant details. Consider setting up a digital filing system now – those midnight feeding sessions might actually be a good time to organize receipts on your phone!

The Preschool Years: Managing Care Costs

Childcare expenses often represent the largest deductible cost for families with young children. For 2024, you can claim up to $8,500 for children under seven. However, the rules about who can claim these expenses might surprise you. Generally, the lower-income spouse must claim childcare expenses, but exceptions exist for situations like school or self-employment.

The Ontario Childcare Access and Relief from Expenses (CARE) tax credit adds another layer of support. This refundable credit can provide up to 75% of eligible childcare expenses, effectively reducing your out-of-pocket costs. Remember, though, that informal care arrangements need proper documentation – even if grandma is providing regular childcare, you’ll need receipts with her SIN number for tax purposes.

School-Age Children: Beyond Basic Care

Once children start school, the nature of tax benefits often shifts. Activity costs become a significant consideration, and 2024 brings some changes to how these can be claimed. While keeping track of multiple activities across the year can be challenging, maintaining organized records is crucial – especially now that the CRA is increasingly requesting digital copies of receipts for review.

Consider creating a simple spreadsheet or using a receipt-tracking app to monitor:

• Regular activity fees
• Equipment costs
• Competition or performance expenses
• Transportation costs for activities
• Additional instruction fees

The Teen Years: New Territory

Teenagers bring new tax considerations, especially if they’ve started earning income themselves. A teen’s part-time job earnings can affect family benefits, but they can also create new opportunities for tax planning. Understanding how to balance their earned income with family benefits becomes crucial.

For 2024, the basic personal amount has increased, meaning teens can earn more before owing tax. However, earned income might affect other family benefits. This makes December an ideal time to review any teen’s earnings and plan for the coming year.

Post-Secondary Planning and Execution

If your child is heading to college or university, or is already there, tax planning becomes even more crucial. The 2024 tax year brings several considerations for post-secondary education:

Tuition credits remain valuable but work differently than in previous years. While students must first apply these credits to their own tax situation, unused amounts can be transferred to parents – up to $5,000 worth. Planning these transfers effectively can significantly reduce your family’s overall tax burden.

RESP withdrawals need careful timing. Consider splitting withdrawals between December 2024 and January 2025 to manage income across tax years effectively. Remember, Educational Assistance Payments (EAPs) count as income for the student, while return of contributions does not.

Special Situations Deserve Special Attention

Ontario parents who have shared custody arrangements will need to be especially careful when tax planning. The 2024 rules for benefit splitting remain complex, but good documentation makes everything easier. Under shared custody arrangements, parents can receive alternating CCB payments, with each receiving 50% of what they would receive if they were the sole caregiver. This means each parent gets six months’ worth of payments over the year. Keep detailed records of care arrangements, expenses, and support payments. Documentation should include calendars showing custody time, receipts for shared expenses, and copies of any court orders or written agreements.

For children with disabilities, additional tax credits and benefits are available. The Child Disability Benefit and Registered Disability Savings Plan (RDSP) offer significant support, but maximizing these benefits requires careful planning and documentation. The Child Disability Benefit can provide up to $2,985 annually for each child who qualifies for the Disability Tax Credit, while the RDSP offers matching grants of up to 300% of contributions, depending on family income. Parents should also be aware that many therapy and treatment costs can qualify as medical expenses, including specialized programs, equipment, and travel expenses for treatment. Remember that some benefits require annual renewal of documentation, so December is an ideal time to ensure all paperwork is current for the coming year.

Digital Requirements for 2024/2025

The CRA’s push toward digital documentation continues to expand. For the 2024 tax year, being prepared means:

• Scanning and storing receipts digitally
• Maintaining organized digital files
• Ensuring electronic documents meet CRA requirements
• Backing up important tax documents
• Understanding digital signature requirements

Year-End Planning Makes All the Difference

December offers several opportunities for tax planning. Consider these year-end strategies:

• Review and possibly accelerate 2025 expenses into 2024
• Evaluate family income splitting opportunities
• Plan RESP contributions to maximize grants
• Review medical expenses and plan timing
• Consider timing of activity payment for optimal tax treatment

Looking Ahead to 2025

Several changes are coming for the 2025 tax year that might affect your family:

• New digital filing requirements
• Updated benefit thresholds
• Enhanced credit amounts
• Modified documentation requirements

Professional Support Makes a Difference

While online filing has made taxes easier, family tax situations can be complex. Professional guidance often pays for itself by identifying overlooked credits and ensuring proper claim timing. At K.K.CPA, we understand the unique challenges Ontario parents face with their taxes.

Take Action Before Year-End

Don’t wait until tax season to address your family’s tax matters. With December 31st approaching, now is the time to ensure you’re maximizing your benefits and preparing properly for the 2025 filing season.

Contact K.K.CPA today to:

• Review your 2024 tax situation
• Identify year-end planning opportunities
• Prepare for 2025 changes
• Organize your documentation effectively
• Maximize available credits and benefits

Call us at 855 667 1727 or contact us here to schedule your year-end family tax review.

K.K.CPA – Supporting Ontario families through every stage of growth