Kids are wonderful. They're also expensive.
Between daycare, before- and after-school care, summer camps and the occasional babysitter, child care costs can take a sizeable bite out of the family budget.
The good news? Some of those expenses can help lower your tax bill.
Here's where things get confusing. Many Canadians search for "child care tax credits," but what you actually claim is the Child Care Expense Deduction. It's a subtle difference — but one worth understanding if you want to keep more money in your pocket.
Is it a tax credit or a tax deduction?
Let's start with the good news: both can help reduce the amount of tax you pay.
The difference is how they do it.
A tax credit reduces the amount of tax you owe.
A tax deduction reduces your taxable income before your taxes are calculated.
Child care expenses fall into the second category. Instead of claiming a credit, you claim the Child Care Expense Deduction, which lowers your taxable income and could reduce your overall tax bill.
It might sound like accountant jargon, but the takeaway is simple: if you're paying eligible child care expenses, don't leave that deduction on the table.
Who can claim child care expenses?
If you're married or living common law, here's the rule that catches many people off guard: the lower-income spouse or partner usually claims the deduction.
Why? Because that's how the CRA designed the program. The deduction is intended to help offset the cost of earning income, so it generally belongs on the lower-income spouse's tax return.
To qualify, you generally need to have paid for child care so you could:
- Go to work
- Run your business
- Look for work
- Attend school
- Conduct research
The child must have lived with you during the year, and if you're paying an individual caregiver, they can't be a relative under the age of 18.
There are a few exceptions where the higher-income spouse can claim the deduction — we'll cover those in a minute.
How much can you claim?
The amount you can claim depends on your child's age and circumstances.
Generally, the annual maximum is:
- $8,000 for each child under age seven
- $5,000 for each child aged seven to 16
- $11,000 for each child eligible for the Disability Tax Credit
- $5,000 for a dependent over 16 who is infirm but doesn't qualify for the Disability Tax Credit
These are the maximum amounts allowed by the CRA, but the amount you can actually deduct also depends on your earned income and how much you paid for eligible child care.
What child care expenses qualify?
Eligible expenses can include:
- Licensed daycare centres
- Nursery schools
- Before- and after-school care
- Babysitters and nannies
- Day camps and sports camps where child care is the primary purpose
- The child care portion of fees charged by some educational institutions
- Boarding schools and overnight camps (subject to lower deduction limits)
Hiring a nanny? That's where things can get a little more complicated.
Depending on your arrangement, you may have payroll responsibilities as an employer, including CPP contributions, Employment Insurance premiums and T4 reporting. If you're unsure, it's worth talking to your accountant before payday rolls around.
Learn more about the tax implications of hiring a nanny
What doesn’t count?
This is probably the question you're really here for.
The short answer? Maybe.
The slightly longer answer? It depends on what you paid for — and whether the primary purpose was child care.
|
Expense |
Can you claim it? |
|
Licensed daycare |
✅ Yes |
|
Before- and after-school care |
✅ Yes |
|
Babysitter or nanny |
✅ Yes |
|
Summer day camp |
✅ Usually |
|
Overnight camp |
✅ Yes, with limits |
|
Nursery school |
✅ Yes |
|
School tuition |
❌ No |
|
Dance, music or sports lessons |
❌ Usually not |
|
Transportation costs |
❌ No |
|
Clothing and school supplies |
❌ No |
When in doubt, ask before you claim. It's much easier than untangling things after you've filed your return.
How do you claim child care expenses?
Fortunately, this part is fairly straightforward.
Keep receipts from every child care provider and make sure they include:
- The provider's name and address
- The amount you paid
- The dates care was provided
- The caregiver's Social Insurance Number (if they're an individual)
The CRA uses this information to calculate your Child Care Expense Deduction.
One important thing to remember: unused child care expenses can't be carried forward to another tax year. If you're eligible to claim them, don't wait.
Can the higher-income spouse ever claim the deduction?
Sometimes.
While the lower-income spouse usually makes the claim, the higher-income spouse may qualify if the lower-income spouse:
- Was enrolled in a qualifying educational program.
- Was unable to care for the child because of a physical or mental impairment.
- Was confined to prison or another institution for at least two consecutive weeks.
- Was living separately because of a relationship breakdown before reconciling.
These situations have specific CRA rules, so if one applies to your family, it's worth getting advice before filing your return.
What about the Canada Child Benefit?
The Canada Child Benefit (CCB) is something completely different.
It's a tax-free monthly payment that helps eligible families with the cost of raising children under 18.
Claiming child care expenses won't create your CCB, but because the deduction lowers your net income, it may affect the amount of benefits you're eligible for in future years.
A little organization goes a long way
Tax season is a lot easier when you aren't digging through drawers looking for daycare receipts.
As you pay for daycare, camps or caregivers throughout the year, keep your receipts together and make sure you've collected the information you'll need when it's time to file.
If your family situation changes — you're heading back to work, starting a business, hiring a nanny or returning to school — it can also change your tax situation. A quick conversation with your accountant today can help you avoid surprises later.
We're here to help
Tax rules aren't everyone's favourite bedtime reading. Fortunately, they're ours.
Whether you're wondering who should claim child care expenses, hiring a nanny for the first time or simply want to make sure you're maximizing your deductions, our team is here to help.
Get in touch with True North Accounting and let's make tax season a little less taxing.
Need help looking for child care programs in Alberta? The Government of Alberta has a Child Care Lookup tool.
Read more about Personal Tax topics that may be helpful to you and your small business.
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