# Leveraging Parental Leave



## Taraz (Nov 24, 2013)

So, correct me if I'm wrong here, but it sounds like you can simultaneously take maternity leave, get a (tax-deductible) babysitter, and go to school while on maternity/parental leave. Am I missing something? That sounds like a crazy deal (definitely something to consider if I decide to spawn again at some point). 

You're basically having your expenses paid while you go to school. Granted, I'm not sure you'd be able to take a full course load with a little one, but part-time studies would be manageable. 

Note: This would also work for guys (you'd only have 9 months though).


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## HaroldCrump (Jun 10, 2009)

The potential for abuse of our EI system never ceases to amaze me.
Every time I say to myself, _this_ must be the worst, along comes an even more ingenious and insidious scheme.


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## lb71 (Apr 3, 2009)

Would not work. When claiming child care expenses you claim the lower of $7000 per child (more if disabled), two thirds of your earned income, and actual expenses. EI does not qualify as earned income, so your earned income would be zero. Thus, you would not be able to deduct anything. This assumes a Jan 1 baby. If you went on mat leave during the year, you would have earned income up to that point and have the benefit of using that income. But if you are hoping to offset child care expenses against your EI earnings, you are out of luck.


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## Guban (Jul 5, 2011)

^ Even if you had the baby in mid year it should still not work. Child care is only deductible if it is for the purpose of earning taxable income. If CRA looks at the dates of child care vs EI dates, then there is an issue.


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## mahmood (Dec 30, 2013)

True Guban, but I'm sure most get away with it as CRA practically can not investigate all or even a small portion dates of child care receipts. Personally I don't think its a big deal either if someone claims the 7k deduction even if some of it was incurred after the baby was born, sometimes you have to consider if its just splitting hairs spending time to eliminate every possible misuse scenerio despite it having a relatively small dollar effect.


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## mahmood (Dec 30, 2013)

Also I would have to check the rules to verify but I would not be surprised if its allowable to deduct child care while you're in school. It sounds fair to me, the parent is incurring an extra cost in order to improve their future income, which they will be taxed on when the time comes.


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## KrissyFair (Jul 8, 2013)

Taraz said:


> You're basically having your expenses paid while you go to school.


I'm not sure how you get from tax deduction to having your expenses paid. You still have to pay your tuition. You still have to pay the babysitter. At the end of the year, yes, you can claim the applicable tax credits for using childcare while studying. But as another poster pointed out, the deduction is AT BEST equal to what you paid the babysitter, but is likely to be much less depending on your earnings in the calendar year. Also, remember that even in the best scenario, it's a reduction of tax owing, not additional income and it is no more (financially) valuable in the year you take maternity leave than it is in any other year. 

@Harold Even if OPs plan were as lucrative as she thought, it's not abuse of the system. If a person is entitled to parental leave and entitled to a tax deduction, whether they do them in the same year or different years is irrelevant.


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## HaroldCrump (Jun 10, 2009)

KrissyFair said:


> @Harold Even if OPs plan were as lucrative as she thought, it's not abuse of the system.


Parental leave is for, well, taking care of a newborn child.
Not for engaging in alternative economic activity.
This is equivalent to being on EI and taking up another job, while still receiving full EI.

There is nothing wrong with doing whatever you want while on parental leave - work 16 hrs. a day, if you like.
But don't ask the tax payers to pay for it.


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## KrissyFair (Jul 8, 2013)

HaroldCrump said:


> This is equivalent to being on EI and taking up another job, while still receiving full EI.


No it's actually not the same at all. In order to have a full time job and still collect EI you would have to falsify your tax return. The OP was never suggesting a falsification, merely a combining of two equally legitimate issues.


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## HaroldCrump (Jun 10, 2009)

I understand you are saying this manoevre is legal.
And I am saying that is what is so wrong with this (i.e. the "system" allows for this).

Notice you used the word _entitlement _twice when speaking of this scheme - that is what is wrong.


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## Taraz (Nov 24, 2013)

lb71 said:


> Would not work. When claiming child care expenses you claim the lower of $7000 per child (more if disabled), two thirds of your earned income, and actual expenses. EI does not qualify as earned income, so your earned income would be zero. Thus, you would not be able to deduct anything. This assumes a Jan 1 baby. If you went on mat leave during the year, you would have earned income up to that point and have the benefit of using that income. But if you are hoping to offset child care expenses against your EI earnings, you are out of luck.


That depends on what your expenses are. If you live cheap, mat leave (max of about $1652/month) would pay for a good chunk of the expenses, and probably some of your tuition as well. 

If you had a bit of income during the year (e.g., if you don't have your baby right on January 1st), then the tax deductions for the tuition would offset most of it (although you'd still shell out for CPP, since that's unaffected by the tax write off). The babysitter deduction would be a minor part of the equation.



HaroldCrump said:


> Parental leave is for, well, taking care of a newborn child.
> Not for engaging in alternative economic activity.
> This is equivalent to being on EI and taking up another job, while still receiving full EI.
> 
> ...


Actually, parental leave is not the same as EI at all. You can actually even work while on parental leave if you want, though they deduct it from your EI. So if you wanted to, you could say work two days a week and collect partial parental leave. It is paid for by the EI system however (that's not quite the same as the taxpayers, even if there is some overlap). 

Another interesting tidbit: 

"If both spouses are working, the lower-income earner must claim the deductions. If the lower income earner is a full-time student, the deduction is available to the higher earner for the number of weeks the spouse attends school."

http://www.taxmanagementcentre.com/news/what_are_the_10_most_missed_tax_deductions.htm


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## KrissyFair (Jul 8, 2013)

Taraz said:


> If you live cheap, mat leave (max of about $1652/month) would pay for a good chunk of the expenses, and probably some of your tuition as well.


Yes, but the point is that going to school in a mat leave year does not benefit you any more than going to school in a non-mat leave year. The deductions are calculated the same way, so you're not 'leveraging' your leave as you put in your title.


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## Taraz (Nov 24, 2013)

KrissyFair said:


> Yes, but the point is that going to school in a mat leave year does not benefit you any more than going to school in a non-mat leave year. The deductions are calculated the same way, so you're not 'leveraging' your leave as you put in your title.


If you did it in a non-mat leave year, you'd have to take an unpaid year off work, so you'd have a year of lost wages. During a mat-leave year, you're being paid while you're off work (granted at a reduced rate).


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## Taraz (Nov 24, 2013)

If it makes you guys feel any better, I'm self-employed, so I didn't see one penny of mat leave pay when I had my baby. This is more of a hypothetical situation.


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## Eclectic12 (Oct 20, 2010)

Taraz said:


> If it makes you guys feel any better, I'm self-employed, so I didn't see one penny of mat leave pay when I had my baby. This is more of a hypothetical situation.


Then too ... most of the parents I know have a tough enough time adjusting to the new realities that baby brings so that they've got no time or energy to put into anything other than a recreational course (ex. painting, finances) versus a full blown course load. So unless there's a lot of high energy (or high family support) situations, I'm not sure how many would could do this ... let alone would.


Cheers


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## Guban (Jul 5, 2011)

mahmood said:


> Also I would have to check the rules to verify but I would not be surprised if its allowable to deduct child care while you're in school. It sounds fair to me, the parent is incurring an extra cost in order to improve their future income, which they will be taxed on when the time comes.


The other spouse can claim expenses if the first is at school. For example, if the wife goes to school while the husband continues to work, ordinarily the lower income spouse is forced to claim child care expenses irrespective of who actually paid for it, and she won't have earned income as she is at school. However in this situation, by completing part C of form T778, the higher income parent can deduct the expenses. See http://www.cra-arc.gc.ca/E/pbg/tf/t778/t778-13e.pdf


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## Potato (Apr 3, 2009)

Taraz said:


> If you did it in a non-mat leave year, you'd have to take an unpaid year off work.


If you can juggle school and a newborn, you can juggle school and work.


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## mahmood (Dec 30, 2013)

I'm amazed at some of the replies. So when on mat leave if u have the capacity to go to school doing so is unethical and you have to stay home 24 hours not see friends not get groceries etc because anytime you leave the house you could have been going to a job instead lol


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## Taraz (Nov 24, 2013)

Potato said:


> If you can juggle school and a newborn, you can juggle school and work.


Yes, but can you juggle school, newborn and work? If you're going to have a kid anyways. You might be able to work and have a kid, or go to school and have a kid. If you pick school and work, then how do you fit the kid in?

By the way, I went back to work when my newborn was 3 months old, so I could definitely handle school + newborn. Just not all three.



mahmood said:


> I'm amazed at some of the replies. So when on mat leave if u have the capacity to go to school doing so is unethical and you have to stay home 24 hours not see friends not get groceries etc because anytime you leave the house you could have been going to a job instead lol


Exactly! Yet these are the same people who mess around with the Smith Manoeuvre to avoid paying taxes.


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## Four Pillars (Apr 5, 2009)

You can do whatever you like on parental leave. The gov't doesn't have any checks in place for this which is good - smaller gov't is good right guys??


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## lb71 (Apr 3, 2009)

Taraz said:


> If you did it in a non-mat leave year, you'd have to take an unpaid year off work, so you'd have a year of lost wages. During a mat-leave year, you're being paid while you're off work (granted at a reduced rate).


You would also have to time it so the baby is born a couple of months before schools starts.


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## lb71 (Apr 3, 2009)

Four Pillars said:


> You can do whatever you like on parental leave. The gov't doesn't have any checks in place for this which is good - smaller gov't is good right guys??


You are required to report any income earned during mat/pat leave. If it exceeds a certain threshold, your EI will be scaled back. They government may not have any checks in place, but could easily audit your T4 employers to find out when you worked.


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## Four Pillars (Apr 5, 2009)

lb71 said:


> You are required to report any income earned during mat/pat leave. If it exceeds a certain threshold, your EI will be scaled back. They government may not have any checks in place, but could easily audit your T4 employers to find out when you worked.


This wasn't true when I took parental leave and got EI. Perhaps things have changed in the last 4 years?


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## lb71 (Apr 3, 2009)

Four Pillars said:


> This wasn't true when I took parental leave and got EI. Perhaps things have changed in the last 4 years?


Perhaps. I cannot comment on four years ago, but there are clawbacks today. Per Service Canada (link below):


> If you work while receiving EI maternity benefits, we will deduct the entire amount you earn dollar for dollar from your benefits.
> Normally if you work while receiving EI parental benefits, you can earn up to $50 per week or 25% of your weekly benefit, whichever is higher. We will deduct any money earned above that amount dollar for dollar from your benefits.


There is a pilot project is in place which will change the way earnings are deducted. More information on the Service Canada website:
http://www.servicecanada.gc.ca/eng/ei/types/maternity_parental.shtml#work


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## peterk (May 16, 2010)

HaroldCrump said:


> Parental leave is for, well, taking care of a newborn child.
> Not for engaging in alternative economic activity.
> This is equivalent to being on EI and taking up another job, while still receiving full EI.


This is entirely correct, even if it isn't legally correct... To argue otherwise is to reveal your rampant desires for free money from the government, and a lack of respect for mothering (two very popular beliefs of the past half century)

EI abusers at least payed into the system... Mat leave is a _gift_ from the people of the country so that you may care for your baby to the best of your ability in the hopes that they grow up to be well-raised, productive adults.


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## Taraz (Nov 24, 2013)

lb71 said:


> Perhaps. I cannot comment on four years ago, but there are clawbacks today. Per Service Canada (link below):
> 
> There is a pilot project is in place which will change the way earnings are deducted. More information on the Service Canada website:
> http://www.servicecanada.gc.ca/eng/ei/types/maternity_parental.shtml#work


That's only relevant if you're actually working while on mat/parental leave, correct? They don't claw it back if you work for 6 months, then have your baby and go on mat leave for the next six months, do they? (If they do, the mat leave program is pretty much pointless.)


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## Taraz (Nov 24, 2013)

At any rate, I'm more curious about what's legal, not opinions on what's moral, in this case. If anyone has any legal reasons why you couldn't attend school while on mat leave, feel free to link to the relevant government sites (I couldn't find any).


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## Four Pillars (Apr 5, 2009)

lb71 said:


> Perhaps. I cannot comment on four years ago, but there are clawbacks today. Per Service Canada (link below):
> 
> 
> There is a pilot project is in place which will change the way earnings are deducted. More information on the Service Canada website:
> http://www.servicecanada.gc.ca/eng/ei/types/maternity_parental.shtml#work


Thanks. I'm wondering if that was in place when I took my leaves and I just wasn't aware of it?

I think it wasn't there when I did my leaves or there is more to it than that. When I took my leave, I got EI plus my company topped up my pay so I basically got my regular pay for the 4 months or whatever length it was.

So the clawback didn't apply to me. Or it didn't exist.

Anyway I didn't work, but I did have my side business still going. I wasn't 100% sure about clawbacks so I just didn't pay myself.

Bottom line is that at the end of the leave, I was really glad to go back to work.


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## lb71 (Apr 3, 2009)

Taraz said:


> That's only relevant if you're actually working while on mat/parental leave, correct? They don't claw it back if you work for 6 months, then have your baby and go on mat leave for the next six months, do they? (If they do, the mat leave program is pretty much pointless.)


Six months should be enough time. You have to accumulate 600 hours of insurable employment.


http://www.servicecanada.gc.ca/eng/ei/types/maternity_parental.shtml#accumulated


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## lb71 (Apr 3, 2009)

Four Pillars said:


> Thanks. I'm wondering if that was in place when I took my leaves and I just wasn't aware of it?
> 
> I think it wasn't there when I did my leaves or there is more to it than that. When I took my leave, I got EI plus my company topped up my pay so I basically got my regular pay for the 4 months or whatever length it was.
> 
> ...


Employer top ups are not subject to the claw back.


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## Taraz (Nov 24, 2013)

lb71 said:


> Six months should be enough time. You have to accumulate 600 hours of insurable employment.
> http://www.servicecanada.gc.ca/eng/ei/types/maternity_parental.shtml#accumulated


I meant that you're only penalized if you actually work during the mat leave. (For example, you could be on mat leave for the first half of the year, but have a high-paying job and make $100k in the second half of the year without any clawback to your 6 months of mat leave earnings.)


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## lb71 (Apr 3, 2009)

Taraz said:


> I meant that you're only penalized if you actually work during the mat leave. (For example, you could be on mat leave for the first half of the year, but have a high-paying job and make $100k in the second half of the year without any clawback to your 6 months of mat leave earnings.)


Correct. What you earn before or after mat/pat leave does not trigger any clawbacks.


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