Filing Tax Returns for Minors (GST/HST Credit)
Updated: Mar 3, 2022
You have asked whether your child should file a tax return [and/or] whether your child is entitled to the GST/HST credit. The answer generally depends on the age of your child and on whether they have earned income.
Goods and Services Tax/Harmonized Sales Tax (GST/HST) Credit
The GST/HST credit is a tax-free quarterly payment made by the CRA that is intended to help individuals and families with low and modest incomes offset all or part of the GST or HST that they pay. The CRA’s GST/HST credit payment may also include additional amounts in respect of provincial and territorial programs [Insert Province/Territory of Residence and name of credit—see CRA Guide RC4210 under “Related provincial and territorial programs”]. The CRA will combine the provincial and territorial credit payments with their GST/HST credit payments (except for the Ontario sales tax credit, as part of the Ontario trillium benefit, which is issued separately). If your child uses the CRA’s direct deposit service for their GST/HST credit payments, the CRA will deposit their provincial and territorial payments into the same account.
A Canadian resident individual is eligible for this credit at the beginning of the month in which any one of the following conditions is met:
The individual is 19 years of age or older before the month in which the Canada Revenue Agency (CRA) issues a quarterly payment (payments are issued in January, April, July and October);
The individual has (or previously had) a spouse or common-law partner; or
The individual is (or previously was) a parent that lived (or previously lived) with their child.
An individual automatically applies for the GST/HST credit (and any related provincial/territorial credits) by filing a tax return. After the return is processed, the CRA will determine the individual’s eligibility for the GST/HST credit and will issue a payment if the individual qualifies.
A tax return should be filed for your child for the 2020 taxation year if they will be turning 19 years of age before April 1, 2022. That way, if your child is entitled to receive the GST/HST credit, their first payment will be received shortly after their 19th birthday. For example, if your child turns 19 in July, August, or September 2021, they will be eligible for the GST/HST credit starting in October 2021, as it is the first credit payment date after the month of their 19th birthday. Similarly, if they turn 19 in October, November, or December 2021, they will be eligible for the credit beginning in January 2021.
The amount of the GST/HST credit will depend on your child’s income (and the income of their spouse or common-law partner, if applicable). The CRA provides credit calculation sheets at canada.ca/en/revenue-agency/services/child-family-benefits/goods-services-tax-harmonized-sales-taxgst-hst-credit/gst-hst-credit-calculation-sheets.html. The total base credit in 2021 was $296 (i.e. for the entire year).
If your child is already 19 years of age or older but has never filed a tax return, your child has up to three years to request a retroactive GSH/HST credit payment. The request can be made by filing tax returns for the prior taxation years.
Did Your Child Earn Income?
Even if they are not yet eligible for the GST/HST credit, a tax return should be filed for your child if they have earned any income (i.e. regardless of their age). Generally, all that is needed to complete a tax return is a Social Insurance Number. Your child would not owe any income taxes provided they earn less than the “basic personal amount” (see canada.ca/en/revenue-agency/services/tax/individuals/frequently-asked-questions-individuals/adjustment-personal-income-tax-benefit-amounts.html). The basic personal amount for a low-income child is $13,808 for the 2021 taxation year.
If your child earned a small amount of income and did not pay any withholding taxes, they would neither owe taxes to the CRA nor would they receive a refund. However, if the employer of your child deducted some income taxes, a refund can be claimed by filing a tax return.
One reason for a young person to file a tax return is that RRSP contribution room is computed based on a percentage of earned income each year that is reported to the CRA. For every year that your child reports earned income, their RRSP contribution room for the following year increases. If a young person begins declaring income early in life, they can get a head-start on growing their RRSP contribution room. After a few years of earning income below the basic personal amount (i.e. such that no taxes are payable in respect of the income), your child may have accumulated a few thousand dollars of contribution room. Later on, when your child begins to work full-time and earns more money, they can utilize this additional RRSP room to lower their net income by investing in an RRSP. If your child subsequently purc
hases their first home and requires access to the funds, they could withdraw up to $35,000 from their RRSP tax-free under the Home Buyers Plan (HBP). In addition, tax-free withdrawals to support paying for educational or training programs are available under the Lifelong Learning Plan.
We would be happy to prepare your child’s tax return if they qualify for the GST/HST tax credit or have earned income.
For more information, please contact firstname.lastname@example.org or 1 844-GYTD-CPA