Have a Child? The CRA Could Give You $300 Extra

The federal government knows the difficulty of parents due to the pandemic. By way of support, there is a CCB special payment in May and an increase in July. For parents looking to invest, the Royal Bank of Canada stock is a profitable option.

| More on:
little girl in pilot costume playing and dreaming of flying over the sky

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn moresdf

The mental stress, physical strain, and financial burden of parents in Canada will linger for the rest of 2020. Schools in the majority of provinces will reopen next year for fear of the coronavirus. If you are a parent, you should know that the federal government enhanced the Canada Child Benefit (CCB).

Due to the school closures and added childcare responsibilities, the Canada Revenue Agency (CRA) is giving out an extra $300 per child for the 2019-20 benefit year. The one-time increase is effective in May 2020.

Pre-condition

The CCB is money parents can use to pay or spend for what their families need. However, the lockdown will add pressure to parents staying home with children. The total enhancement package will cost the federal government about $2 billion.

There is a pre-condition if you want to receive the $300 extra. As of May 2020, you should have filed your 2018 tax return, aside from having an eligible child in your care. If not, submit it as soon as possible.

Another increase in July

Another CCB increase is coming in July, as announced by Prime Minister Justin Trudeau. The hike should be in place as part of the 2020-21 benefit year. With the increase, the maximum annual benefit will amount to $6,765 per child under age six ($563.75 per month) and $5,708 per child aged six through 17 (475.66 per month).

Take note that the future increase is in addition to the $300 one-time special CCB payment in May 2020. Bear in mind too that the CCB reduces gradually as income increases. Thus, the amounts here are the maximum you can receive.

Investment window

The CCB plus the extra-payment opens an investment window to parents who are not cash strapped. They can use the benefit for its intended purpose and free up savings for investment. The investment income can boost the family’s income

Investing will enable parents to create passive income. However, you couldn’t cherry-pick stocks in the present market environment. Your choice must be a high-quality, dependable dividend stock.

Royal Bank of Canada (TSX:RY)(NYSE:RY) is a no-brainer option. You will be investing in the largest publicly listed company in Canada with a dividend track record of 150 years.

Now is an excellent time to take a position while the stock price is below $100. Market analysts are forecasting a capital appreciation of 15.5% in the next 12 months should the market stabilize. Meanwhile, you can compound your savings with its 4.67% dividend.

RBC took earnings hit in Q2 fiscal 2020 (quarter ended April 30, 2020). Net income fell to $1.41 billion from $3.23 billion in Q1 2019 due mainly to the $2.83 billion loan loss provision. All top six banks are increasing the provisions for credit losses.

This $134.21 billion bank is taking appropriate actions to mitigate the increased uncertainty due to the pandemic. The dividends are safe, given the low 53.78% payout ratio.

Priceless responsibilities

While you cannot quantify the value of parenting, the one-time CCB payment is a big help now, more than ever. The increase in July should further lessen the financial hardship of parents in 2020.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Christopher Liew has no position in any of the stocks mentioned.

More on Dividend Stocks

growing plant shoots on stacked coins
Dividend Stocks

5 Dividend Stocks to Buy With Yields Upwards of 5%

These five companies all earn tonnes of cash flow, making them some of the best long-term dividend stocks you can…

Read more »

funds, money, nest egg
Dividend Stocks

TFSA Investors: 3 Stocks to Start Building an Influx of Passive Income

A TFSA is the ideal registered account for passive income, as it doesn't weigh down your tax bill, and any…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

3 of the Safest Dividend Stocks in Canada

Royal Bank of Canada stock is one of the safest TSX dividend stocks to buy. So is CT REIT and…

Read more »

Growing plant shoots on coins
Dividend Stocks

1 of the Top Canadian Growth Stocks to Buy in February 2023

Many top Canadian growth stocks represent strong underlying businesses, healthy financials, and organic growth opportunities.

Read more »

stock research, analyze data
Dividend Stocks

Wherever the Market Goes, I’m Buying These 3 TSX Stocks

Here are three TSX stocks that could outperform irrespective of the market direction.

Read more »

woman data analyze
Dividend Stocks

1 Oversold Dividend Stock (Yielding 6.5%) to Buy This Month

Here's why SmartCentres REIT (TSX:SRU.UN) is one top dividend stock that long-term investors should consider in this current market.

Read more »

IMAGE OF A NOTEBOOK WITH TFSA WRITTEN ON IT
Dividend Stocks

Better TFSA Buy: Enbridge Stock or Bank of Nova Scotia

Enbridge and Bank of Nova Scotia offer high yields for TFSA investors seeking passive income. Is one stock now undervalued?

Read more »

Golden crown on a red velvet background
Dividend Stocks

2 Top Stocks Just Became Canadian Dividend Aristocrats

These two top Canadian Dividend Aristocrats stocks are reliable companies with impressive long-term growth potential.

Read more »