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Does it make sense for a stay-at-home mom to go back to work?

Expert: Krysta Adamski

Mary asked:

My kids are now in high school. I have been a stay-at-home mom for the last 17 years. Now, I am considering getting a job, rather than sit at home doing nothing all day. However, my husband has been able to use me as a deduction on his taxes.

If I get a job, I don't want for us to end up paying more in taxes than what I bring home. If my husband makes $100,000, how do I figure out what the minimum salary is, to make my going out to work worthwhile, and actually make us money, instead of costing us money?

Krysta Adamski answered:

Your husband is able to claim a tax credit for you that is called the spousal amount, if you have no income or minimal income. The tax credit is useful for families with only one working spouse; however, the tax savings of the credit only amount to approximately $2,000 (depending on which province you live).

What this means is that if you go to work and can take home more than $2,000 after taxes, you will be ahead from a tax perspective. Of course, very few people would be willing to go to work to net the same family income so then it becomes a matter of how much extra it would take for you to be willing to go back to work - $5,000? $10,000?

For example, if you husband makes $100,000 and you are not working, his take home pay after taxes would be approximately $70,000 (if you live in Nova Scotia), $72,500 (if you live in Ontario) and $75,000 (if you live in British Columbia).

If you were to go to work and earn $10,000, your husband's net take home pay would be lower by approximately $2,000 but your overall family take home pay would increase to approximately $77,000 (NS), $80,000 (ON) and $83,000 (BC). By going to work and earning $10,000 you will be increasing your overall family income by $7-8,000, depending on where you live.

Everyone is entitled to the basic personal amount credit, which is $9,600 for 2008. What this means is that you can earn $9,600 and not pay any federal taxes. There is also an employment amount of up to $1,000 if you are an employee Which brings the amount you can earn with no federal taxes to $10,600. The basic amount for most provinces is lower than this so you would owe some provincial taxes on this amount.

Please note that for simplicity, these examples have not factored in EI and CPP premiums. Also, another important consideration is whether or not you receive Canada Child Tax Benefits. If you do, earning more family income will reduce the monthly payments you receive.

If your husband is currently making $100,000, then any payment you do receive would be very minimal. The child tax benefits are totally eliminated at a family net income of around $110,000.

About the author

Krysta L. Adamski, CA is a senior tax manager with WBLI Chartered Accountants. She has experience with a wide variety of clients, dealing with matters such as corporate reorganizations, estate and succession planning, international tax matters, the taxation of real property, personal, corporate and trust tax planning and many others.

Krysta began with WBLI in 1997 and has been working with their tax group since 2001. WBLI Chartered Accountants is the largest independent full service accounting firm in Atlantic Canada.

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