As the world continues to change and office life comes back into mainstream culture, enrolling kids in child care is once again a reality for a lot of working Canadian families. This has implications for tax season as claiming child care expenses lowers your net income, reducing the amount of taxes you have to pay. It can be tricky figuring out who can claim expenses and what payments are tax deductible.
Our insightful CPAs are here to answer all of your tax-related questions and help you make sense of taxes and deductions.Child care expenses 101
Daycare, summer camp, nurseries and nanny services are all deductible expenses for parents, but the tax deduction must be claimed by the parent in the lower tax bracket. There are exceptions, however, such as the value of the deduction, which can vary greatly per child.
If the child lives with you and is under 16, the tax deduction limit is:
- $8,000 for each child under the age of 7
- $5,000 for each child between the ages of 7 and 16
- $11,000 for disabled, dependent children of any age who qualify for the disability tax credit
- $5,000 for disabled, dependent children over the age of 16 who do not qualify for the disability tax credit
This tax deduction lowers your net income on your tax return by the amount claimed.
How do I know if I’m eligible to claim child care?
Here are some eligibility requirements:
- You must be working, going to school or running a business
- The child must live with you
- If you have a nanny, they cannot be a relative who is under the age of 18
What qualifies as a child care expense?
You can claim child care expenses incurred for the following:
- Caregivers providing child care services
- Day nursery schools and daycare centres
- Educational institutions, for the part of the fees that relate to child care services
- Day camps and day sports schools where the primary goal of the camp is to care for children
- Boarding schools, overnight sports schools, or camps where lodging is involved (however, the deduction is less and the child cannot make more than $13,229/year)
What are child care expenses I cannot claim?
You cannot claim payments for any of the following:
- Medical or hospital care, clothing or transportation costs
- Fees that relate to education costs at an educational institution, such as tuition fees of a regular program or a sports study program
- Fees for leisure or recreational activities, such as tennis lessons or the annual registration for Scouts
Child care expenses that are reimbursed by an employer also do not qualify.
How do I claim child care expenses?
The most common method is by using the Child Care Expense Deduction Form to figure out your permitted amount of child care expenses. You must get a receipt from the individual or organization showing information about the services provided. If the services were provided by an individual, you will need the social insurance number of the individual.
Remember, you cannot carry forward unclaimed expenses to another year.
Can the higher-income spouse claim child care expenses?
Normally, no. The person with the lower net income (including zero income) usually makes the claim. But, if one of the following conditions apply, the person with the higher net income can claim the child care expenses.
The person with the lower net income was:
- Enrolled in an educational program that is offered by a secondary school, college, university or other designated educational institution.
- Not capable of caring for children for at least two weeks because of an impairment in physical or mental function.
- Confined to a prison or similar situation for at least two weeks.
- Living separate and apart from the spouse or common-law partner due to a breakdown of the relationship, but reconciled before March 1 of the following year.
See more specifics about this question on the CRA website.
How is this different from the Canada child benefit?
The Canada child benefit (CCB) is a tax-free monthly payment made to eligible families to help with the cost of raising children under 18 years of age. The CCB may include the child disability benefit and any related provincial and territorial programs.
Learn more about the CCB on CRA’s website.
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