Canada Child Benefit Increase!
What Will Your Monthly CCB Be?
Fee-for-service financial planner and founder of PlanEasy.ca
The Canada Child Benefit is one of the most generous government benefits in Canada and it just increased! Unlike many government benefits, the Canada Child Benefit is available to low, moderate, and also some high income families.
The amount you receive from the Canada Child Benefit (CCB) depends on a few factors, one is the taxable net income for the family (line 23600 on your tax return), another is the number of children in the family, and the final factor is the age of each child.
The Canada Child Benefit is an “income tested” government benefit. The higher your taxable net income is, the lower your Canada Child Benefit will be. For some high income families, at a certain level of income the Canada Child Benefit will be reduced to $0. Anyone with income above that income level will not receive any benefit. The tricky thing is that this income level is different depending on the number of children and their ages.
The Canada Child Benefit also changes every year. New benefits start in July and are based on prior years tax return (the first payment of the updated benefit is July 20th).
The Canada Child Benefit also increases with inflation. The new 2020 Canada Child Benefit has increased by 1.9% versus 2019.
So how much Canada Child Benefit can you expect in July? We’ve got a table below that shows the Canada Child Benefit based on family taxable net income (line 23600) in $10,000 increments, so you can figure out generally how much you can expect in July*
*This year is a bit unique. If you delayed filing your taxes after the normal April 30th deadline then you may not see a change in your CCB right away. The recalculation will be delayed but any change will be retroactive. So using the table below, if you notice that your CCB will drop this year, then it would be prudent to put some of the current higher payments aside.
What Are The New CCB Amounts?
The Canada Child Benefit starts at a maximum amount depending on the number of children and the children’s ages. This amount then gets reduced based on the family’s income level.
The new CCB amounts are in the table below. These amounts are the maximum a family would receive for each child if they had taxable net income below $31,711 in 2019.
How Does CCB Work?
The Canada Child Benefit is an “income tested” government benefit. This means the benefit is reduced as income increases, but how does this work exactly?
As a family’s taxable net income increases the Canada Child Benefit gets “clawed back” at a certain rate. This rate depends on the family’s income level. Below a certain income level there is no clawback but as income increases that clawback rate changes. The table below shows the different clawback rates.
But what does this clawback mean? The clawback reduces the Canada Child Benefit as income increases. Here are two examples…
Example 1: For a family with two children over 6-years old the maximum annual benefit they would receive is $11,416. If they earned $70,000 in 2019 then they would receive $6,348 from CCB from July 2020 to June 2021. They start with the maximum but then this gets reduced based on their income. The first reduction is at a rate of 13.5% for income between $31,711 and $68,708 ($68,708 – $31,711 = $36,997 x 13.5% = $4,995 clawback). The second reduction is at a rate of 5.7% for income between $68,708 and $70,000 ($70,000 – $68,708 = $1,292 x 5.7% = $74 clawback).
Example 2: For a family with three children under 6-years old the maximum annual benefit they would receive is $20,295. If they earned $70,000 in 2019 then they would receive $13,162 from CCB from July 2020 to June 2021. They start with the maximum but then this gets reduced based on their income. The first reduction is at a rate of 19.0% for income between $31,711 and $68,708 ($68,708 – $31,711 = $36,997 x 19.0% = $7,029 clawback). The second reduction is at a rate of 8.0% for income between $68,708 and $70,000 ($70,000 – $68,708 = $1,292 x 8.0% = $103 clawback).
Want more info on how the Canada Child Benefit works? Check out this old post.
How Much CCB Could You Expect?
We can expand this math and look at all sorts of different family scenarios. To help you estimate how much CCB you can expect in 2020 we’ve created the table below. This table is based on line 23600 of your tax return. For a couple you will need to add both you and your partner’s line 23600 to figure out your total family income.
This table shows the monthly benefit you could expect after the CCB increase… (click here for an even larger table up to $350,000 in family income).
How To Increase Your CCB Next Year
Want to increase your Canada Child Benefit next year? One great way to increase the Canada Child Benefit is through RRSP contributions. For families an RRSP contribution can be more attractive than a TFSA contribution because an RRSP contribution will decrease taxable net income.
An RRSP contribution is considered a tax deduction, it reduces line 23600 on your tax return. Someone who earned $70,000 but made a $10,000 RRSP contribution will have a taxable net income of $60,000. This increases their CCB the following year.
Although it might be attractive to make an RRSP contribution to boost your CCB this isn’t always the best decision. RRSP contributions can be detrimental to low income retirees who expect to receive Guaranteed Income Supplement (GIS) in the future. But! With a bit of careful planning you can still contribute to an RRSP as long as there is a plan to draw down the RRSP before age 65 when GIS begins.
This is also where the help of a good financial planner can pay for itself. If you’re already saving money then a bit of careful tax and benefit planning can lead to lower income tax and higher government benefits. Learn how to optimize your government benefits both now and in retirement.
Canada Child Benefit Is Increasing
For many families the Canada Child Benefit is an important government benefit that helps with the cost of raising children. It’s one of the most generous government benefits in Canada but it also comes with some steep “clawback” rates. Understand how these clawback rates work and being smart about how you save can help increase you benefit.
Each year the Canada Child Benefit will increase by inflation. This means that every year families can expect to receive a slightly higher amount as long as they earn the same level of income.
Although the CRA calculates the new CCB amount automatically each July, it can be nice to know in advance how much you could expect to receive, especially when you’ve experienced a large change in income.
Financial planner, personal finance geek and founder of PlanEasy.