Should Children File Tax Returns in Canada?

What does the Canadian government say about children paying taxes?

The Canada Revenue Agency (CRA) does not specify any age at which individuals must pay income tax. The CRA only categorizes individuals based on their residential ties to Canada with taxes applying once an individual earns more than the Basic Personal Amount (BPA).

So, if a child's income exceeds the BPA threshold, they will have to file a tax return.

What is the Basic personal Amount?

The Basic personal amount is a non-refundable tax credit that can be used to offset tax liabilities. All individuals can claim it, and it provides a full reduction from federal income tax for those with taxable income below the prescribed income.

Simply put, you are exempt from filing your income tax if your income is below the BPA amount.

The Basic personal income amount for the 2023 tax year is $15,000

What is Residency status?

According to the Canada Revenue Agency, an individual is considered a resident of Canada for income tax purposes once they establish enough residential ties,

Significant residential ties in this context include:

• a home you own or lease in Canada
• a spouse or common-law partner in Canada
• dependents in Canada

Secondary residential ties that may be relevant include:

• personal property in Canada, such as a car or furniture
• social ties in Canada, such as memberships in Canadian recreational or religious organizations
• economic ties in Canada, such as Canadian bank accounts or credit cards
• a Canadian driver's license
• a Canadian passport
• health insurance with a Canadian province or territory

If you have recently immigrated, it is also important to understand that the CRA considers all permanent residents, refugees, temporary residents, and newcomers to Canada only for the first year.

Who needs to file a 2023 income tax return

The CRA makes filing a 2023 return mandatory for individuals who:

• Have to pay tax for the year
• Want to claim a refund
• Want to claim the Canada Workers Benefit (CWB)
• Want to begin or continue receiving credits and benefits like the Canada child benefit, GST/HST credit, etc.
• Received a request from the CRA to file a return
• Are jointly electing to split pension income with their spouse or common-law partner
• Disposed of capital property (which could be a principal residence) or realized a taxable capital gain in the year
• Have to repay all or part of your old age security (OAS) benefits or employment insurance (EI) benefits
• Have not repaid all of the amounts you withdrew from your registered retirement savings plan (RRSP) under the Home Buyers' Plan (HBP) or Lifelong Learning Plan (LLP)
• Have to contribute to the Canada Pension Plan (CPP) for 2023 (this can apply if your total net self-employment income and pensionable employment income is more than $3,500)
• Are paying EI premiums on self-employment income or other eligible earnings
• Have incurred a non-capital loss in the year that you want to be able to apply to other years
• Want to transfer unused tuition fees or carry forward unused tuition, education and textbook amounts to a future year.
• Want to report income that would allow you to contribute to an RRSP, a pooled registered pension plan (PRPP) or a specified pension plan (SPP) to keep your RRSP deduction limit for future years up to date.
• Opened a First home savings account (FHSA) in 2023 and want to keep their FHSA participation room up to date
• Want to carry forward the unused investment tax credit on expenditures incurred during the current year to a future year.
• Want to report income that will allow them to increase your Canada training credit limit

At what age do I need to pay taxes as an international student in Canada?

Again, your age does not matter for tax purposes. The CRA will consider your residency status to determine the type of taxes you'll have to pay in Canada.

As an international student, you may pay taxes depending on how you fit into the following categories:

• resident (includes students who reside in Canada only part of the year)
• non-resident
• deemed resident
• deemed non-resident

Conclusion

In conclusion, children earning an income in Canada will have to start paying taxes once they exceed the BPA amount. It is crucial for parents or guardians to consult with a tax professional or use reputable tax software to determine their child's status and earnings and if they need to file a tax return based on their specific circumstances.