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Tax breaks available in the quest for a child

B.C. government adds 5 % credit based on the total expense to a maximum of $910

by Ron Clarke

Bringing a child into your life is a wonderful experience.

In addition to all the love and excitement, there is expense.

Just as with a natural child, this also is your life in the case of adoption, in vitro, and surrogate parenthood — both the wonderment and the expense.

Adopting a child involves different expenses not borne by those having a baby.

And Canada’s tax policy acknowledges this reality. If you adopt a child, defined as a person under the age of 18, you will likely qualify for the Canada Revenue Agency’s (CRA) adoption tax credit.

Allowable expenses are broad and include fees paid to a licensed adoption agency, legal fees and court costs attributed to an adoption order, necessary travel and accommodation expenses for adoptive parents and the adoptive child during the adoption process.

In the case of an adoption of a child born or residing outside of Canada, allowable expenses include mandatory fees paid to the foreign country and to Canada for the immigration of the child, along with translation fees.

Timing is important to making an adoption expense claim.

For an expense to be eligible for inclusion in the claim, the expense must have been incurred after the adoption process has begun by way of an adoption application registered with the government, and before the application order is recognized by the government or before the child begins to live with you permanently.

This is referred to as the adoption period, and regardless of the length of time of the adoption period, the claim on your tax return must be made in the year of the completion of the adoption.

The federal adoption tax credit for 2023 is based on a maximum $18,210 of expenses, in the end translating into a 15 per cent maximum tax credit equaling $2,731.

The B.C. government adds a five per cent tax credit based on the total expense to a maximum of $910.

Further, this credit is a non-refundable credit, meaning only the amount of the credit needed to reduce your taxes to zero qualifies, and any balance remaining is not refunded to you.

And it’s important to know that for couples adopting a child, CRA permits the adoption credit to be claimed entirely by either spouse, or split between them as they choose, so be sure to calculate and claim this credit to take full advantage of it for you and your spouse.

Sticking with the kid theme, for those couples unable to conceive a child, and choosing to try various natural methods to make it happen, or as CRA states, “pursing the medical intervention to conceive a child,” some very specific medical costs can now be claimed on their T1 medical schedule as an expense.

In addition to regular type medical services in aiding the couple, allowable expenses now include fertility clinic and donor bank services provided to an individual, and also expenses to support a surrogate mother.

Ron Clarke, owner of JBS Business Services in Trail, provides accounting and tax services.