Physically active kids - what a tax relief!

By Charles Fu

We know that nagging our kids to get more involved in physical activities will pay off for them in the future, but there's also something in it for parents right now: a new tax credit.

The non-refundable tax credit, proposed in the 2006 federal budget, applies to fees paid to register a child in an eligible physical activity program. Under the Children's Fitness Tax Credit (CFTC), parents can claim up to $500 per year for each child who is under 16 years of age at any time during the year. The age threshold is raised to 18 years of age for children eligible for the disability tax credit. As with most non-refundable tax credits, the CFTC is calculated by multiplying the eligible amount by the lowest marginal tax rate. This will result in a maximum federal CFTC of approximately $78 per eligible child in 2007.

Does playing sports games on the Nintendo Wii qualify?

Unfortunately, the Nintendo Wii game system doesn't 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 somewhat restrictive, this covers a wide range of sports/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 CFTC in the year that the eligible fees are paid — not when the activity takes place. Any amounts paid in 2006 on behalf of a 2007 eligible program will not qualify. If you paid for a 2007 activity in 2006, you may want to get a credit for the 2006 payment and have the amount re-invoiced now. Although you don't have to file receipts with your 2007 tax return, you should keep them in case the Canada Revenue Agency wants to verify your claim.

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.