By Troy Peart The Afro News Vancouver
Now that summer holidays are here, most parents are wondering what to replace several hours of academic activity that their children had in school with. While the greatest temptation may be to allow their children to simply play more video games, watch more TV and spend more time on their computers, this alternative would probably do very little to reverse the increasing trend of childhood obesity. Fortunately, the Federal Government is of the same mind set and as a result has created a fitness tax credit to defray a portion of the costs of any eligible fitness expenses incurred.
The fitness tax credit allows parents to claim up to $500 per child for prescribed programs of physical activity for every child that is under the age of 16 at the beginning of the year. In order for the program to be eligible, it must be: ongoing (a minimum of 8 weeks or 5 consecutive days), involve a significant amount of physical activity that contributes to cardio-respiratory endurance (plus one or more of muscular strength, muscular endurance, flexibility or balance) and be supervised and appropriate for children.
As with most tax credits, the amount of the reduction in taxes payable is dependent on the lowest marginal Federal tax rate which is currently 15%. For example, if a parent uses the full $500 tax credit, their taxes payable will decrease by $500 x 15% or $75. As this credit is non refundable, the parent that claims it must have paid at least $75 in taxes.
If one is fortunate enough to have enrolled their child in a program that also qualifies as child care expenses, the first $7,000 of expenses will be eligible for a tax deduction (for the spouse with the lower income) and then the next $500 can be applied to the fitness tax credit. As tax deductions are based on one’s individual marginal tax rate (which is at least as much as the Federal tax credit), it would usually be more advantageous to claim the eligible child care expenses first.
While the fitness tax credit is often viewed as not being very much money, it is nonetheless still a way one can reduce their taxes. In most instances, the enrolment in a qualifying program would have been done regardless so this can be viewed as getting a free $75. One must however remember to claim it on their next tax return as well as to keep a receipt in case Canada Revenue Agency asks for it later.
Troy Peart BBA, CFP, CFA can be emailed at troypeart@shaw.ca. Your questions comments or suggestions for future articles are encouraged.
