We know that nagging our kids to get more involved in physical activities will pay off with their good health in the future, but there’s also something in it for parents right now – a healthy tax break.
Federal Activity Tax Credits
The federal government introduced the Children’s Fitness Tax Credit (CFTC) in 2007, and hit a home run, in both ballparks and family tax returns. Mr. Stephen Harper noted that the CFTC benefits 1.4 million families each year – an impressive figure indeed!
The federal CFTC applies to fees paid to register a child in an eligible physical activity program. Eligible expenses include sports team fees, dance lessons or swimming classes at your community centre. Generally, you can claim up to $500 per year for each child who is under 16 years of age at any time during the year. In terms of tax savings, you can save up to $75 per eligible child for 2014.
Provincial Children’s Activity Tax Credits
But the tax relief does not stop there. The Ontario government also introduced the Children’s Activity Tax Credit (CATC) in 2010 to help parents with the cost to register their children in organized activities. Unlike the federal credit, the Ontario CATC covers both ‘fitness’ and ‘non-fitness’ activities. For 2014, you can claim up to $541 in eligible expenses and receive up to $54 for each child under 16 (or up to $108 for a child with a disability who is under 18). The criteria for fitness activities under the Ontario CATC are the same as for the federal credit.
So, does playing sports games on the Xbox One qualify?
Unfortunately for kids, that does not count. An eligible program must take place off the couch, and include cardio-respiratory endurance and at least one of muscular strength, muscular endurance, flexibility or balance. While seemingly restrictive, this criteria actually covers a wide range of sports and recreational activities – such as folk dancing, horseback riding and karate. Programs must be supervised, suitable for children and ongoing. A once-a-week program that lasts eight weeks would qualify, as would a sports camp lasting five consecutive days.
You must claim the tax credits in the year that the eligible fees are paid — not when the activity takes place. If you paid for a 2014 activity in 2013, you would want to ensure that the amount was claimed on your 2013 income tax return.
Lastly, Mr. Harper was so enamoured by the success of the CFTC that he has announced his intention to double the existing CFTC from $500 to $1,000 per year for each child, and also to introduce a new Adult Fitness Tax Credit. Stay tuned for these potential developments.
But for now, giving your kids a head start on physical fitness will pay dividends as they grow — and provide you with a healthy tax break right now.
Charles Fu is the Senior Tax Manager at Sloan Partners. Contact Charles today for an analysis of your family’s tax savings opportunities.