What’s in this article?
Note: H&R Block's tax software is optimized so that the higher income earner is the one who claims this credit.
The Family Tax Cut is a non-refundable tax credit of up to $2,000 that you or your spouse or common-law partner may claim if your child under the age of 18 ordinarily lives with you or your spouse or common-law partner throughout the year. The Family Tax Cut allows you to hypothetically split the income of the person with the higher earnings with your lower income spouse or common-law partner in a taxation year. You can transfer up to $50,000 of taxable income and the credit is calculated based on the net reduction to your and your spouse’s or common-law partner’s combined federal taxes. This non-refundable tax credit can be claimed by either partner but cannot be shared.
Since this is a non-refundable tax credit, it does not affect the calculation of provincial or territorial income tax. The calculation of benefits and credits that are based on your net income and that you are entitled to, are not affected if you claim the Family Tax Cut.
For Québec taxpayers, the application of the tax abatement reduces the maximum Family Tax Cut tax savings to $1,670. (83.5% x $2000).
You are eligible for this credit if you meet the following conditions:
- You were married or living in a common-law partnership;
- You were not separate or apart because of a breakdown in your relationship for a period of 90 days or more including December 31st;
- You were both residents of Canada on December 31st (or on the date of death);
- You both file a tax return for the year the credit is being claimed; and
- You and your spouse or common-law partner must live throughout the year with your child who is under 18 years of age at the end of the year.
Canada Revenue Agency (CRA) says…
You cannot claim this credit if:
- you are confined to a prison or similar institution for a period of 90 days or more during the year;
- your spouse or common-law partner is claiming the credit for the year;
- either you or your spouse or common-law partner became bankrupt in the year; or
- either you or your spouse or common-law partner has elected to split eligible pension income
H&R Block's tax software will automatically calculate and claim this credit for you, if you meet all of the eligibility criteria and if you tell us, on the Optimizations page, that you want to claim the credit.
- Schedule 1-A: Family Tax Cut (CRA website)
- Family Tax Cut (CRA website)
- Line 423 – Family Tax Cut (CRA website)