Your Guide to Qualifying Child Care Expenses
For many Canadian families, child care is one of the biggest household expenses. The good news is that the Canada Revenue Agency (CRA) recognizes this challenge and offers a valuable deduction for Qualifying Child Care Expenses.
What Are Qualifying Child Care Expenses?
Simply put, these are amounts you or another person paid to have someone look after an eligible child so that you could:
- Earn income from employment.
- Carry on a business (alone or as an active partner).
- Attend school under specific educational program conditions.
- Carry out research or similar work for which you received a grant.
This deduction is meant to help parents who need child care so they can work, study, or run a business. If you’re paying for child care while on parental leave, for instance, it typically wouldn’t qualify unless you’re also undertaking one of the eligible activities.
Who Counts as an Eligible Child?
To claim child care expenses, the child must meet certain criteria:
- They must be your child, your spouse’s, or your common-law partner’s child.
- They must have been dependent on you or your spouse/common-law partner.
- They must have been under 16 years of age at any time during the year, unless they have a physical or mental impairment and were dependent on you.
- The child must have lived with you at the time the expenses were incurred.
What Types of Child Care Expenses Can You Claim?
The CRA cast a fairly wide net when it comes to eligible child care services. This can include payments to:
- Daycare centres and day nursery schools.
- Individuals providing child care services (e.g., nannies, babysitters). Important: If paid to an individual, you’ll need a receipt that includes their Social Insurance Number (SIN).
- Day camps and day sports schools where the primary goal is to care for children (not primarily for leisure or sports instruction).
- Boarding schools or overnight camps (only the portion relating to child care, not education or recreational activities).
- Educational institutions (only the portion of tuition fees directly related to child care services).
- Even costs like advertising expenses or placement agency fees incurred to find a child care provider can qualify!
What’s NOT Included?
It’s equally important to know what you cannot claim:
- Medical or hospital care costs.
- Clothing or transportation costs.
- Tuition fees for regular or sports study programs (unless it’s the specific child care portion).
- Fees for leisure or recreational activities (e.g., tennis lessons, hockey team fees).
- Child care expenses that have already been reimbursed by an employer or another program.
- Payments to the child’s other parent, your spouse or common-law partner (if they are the child’s parent), or a person under 18 who is related to you by blood, marriage, or adoption.
- Child care paid while on parental leave, if not also working or studying
Who Should Claim the Deduction?
In most cases, the parent with the lower net income must claim the child care expenses. This rule is in place because the deduction reduces your taxable income, and it’s generally most beneficial for the lower-income earner to claim it.
However, there are exceptions where the higher-income spouse can claim the deduction, such as when the lower-income spouse is:
- Attending school (full-time or part-time, for a specific duration).
- Incapable of caring for the child due to physical or mental infirmity (certified by a medical doctor).
- Confined to a prison or similar institution for at least two weeks.
If parents are separated, each parent may claim the portion of expenses they paid while the child lived with them.
What are the Limits?
The maximum amount you can claim for child care expenses depends on the child’s age and circumstances:
- $8,000 for each eligible child who was under 7 years of age at the end of the year.
- $5,000 for each eligible child between 7 and 16 years of age at the end of the year.
- $11,000 for each eligible child who qualifies for the Disability Tax Credit.
- There are also weekly limits for certain types of care (e.g., $200 per week for children under 7, $125 per week for children 7-16, and $275 per week for children with disabilities).
The total amount you can claim is also limited to two-thirds (2/3) of your earned income for the year, or the actual amount paid, whichever is the least of these three calculations.
How to Claim Your Child Care Expenses
To claim your child care expenses, you’ll need to complete Form T778, Child Care Expenses Deduction. You don’t need to submit your receipts with your tax return, but you must keep them in case the CRA asks to see them. Ensure your receipts include all the necessary information, especially the SIN of individual caregivers.
Beyond the Federal Deduction: Provincial Support
Some provinces, like Ontario, offer additional support for child care expenses, such as the Ontario Child Care Tax Credit (CARE). This can further reduce your costs, so be sure to check what’s available in your province or territory.
Contact Us Now
These tax deductions can seem complex, but understanding your qualifying child care expenses is a sure way for Canadian families to save money. Always refer to the official CRA guidelines on their website or consult with us for personalized advice. ( Link: KATA website – Contact Us)
REFERENCES:
- Canada Revenue Agency (CRA) – Line 21400 – Child care expenses: This is the primary source for federal child care expense deduction information, covering eligibility, types of expenses, who can claim, and general rules.
- Canada Revenue Agency (CRA) – Income Tax Folio S1-F3-C1, Child Care Expense Deduction: This folio provides more detailed technical information on the child care expense deduction.
- Form T778, Child Care Expenses Deduction: This form is used to calculate and claim child care expenses.
- Ontario Childcare Access and Relief from Expenses (CARE) Tax Credit: This credit provides provincial support for child care expenses in Ontario.
- https://www.ontario.ca/page/ontario-child-care-tax-credit