Child care can be expensive. In my city it’s common for government-approved daycares to charge about $1,000 per child, and the costs seem to keep going up slowly each year.
The CRA recognizes this and gives us a bit of a tax break for child care expenses.
Claiming Child Care Expenses
To claim child care expenses you’ll need to use Form T778 (Child Care Expenses Deduction). If you are using tax software it will automatically use this form and for couples the spouse with the lower income makes the claim (done automatically with tax software).
Eligibility of Expenses
In order to be eligible, the expenses must be:
- A child of the taxpayer (or their spouse/common-law partner)
- A child who is considered a dependent of the taxpayer (or their spouse/common-law partner)
- A child is considered anyone under the age of 16 at any time during the year and includes adopted children.
Child Care Providers
The child care expenses must be provided within Canada (but deemed residents living in a foreign country also qualify).
Examples of eligible child care providers are:
- Nursery school or daycare
- Day camps or day athletic schools
- Boarding schools
- Babysitters (see below)
In order to be eligible, babysitters must be someone who is not: the child’s mother or father (or supporting person), or someone who is under 18 and related to the taxpayer.
Child Care Expenses That Are Eligible
The following costs can be claimed:
- Babysitting costs
- Costs of paying a live-in nanny
- Boarding school, day camp and overnight sports school costs up to a maximum of:
– $100 per week (children age 7-16 that are not disabled)
– $175 per week (children under 7 that are not disabled)
– $250 per week for disabled children
Child Care Expenses That Are Not Eligible
The following are child care expenses that aren’t eligible:
- Tuition costs for children
- Hospital or medical care
- Clothing, transportation costs related to child care
- Costs that will be reimbursed (ie. employer reimbursement)
Limitations of Child Care Expenses
The tax deduction for child care expenses is limited to 2/3 of the taxpayer’s earned income.
Earned income is typically salaries/wages, net income from a home business and the taxable portion of scholarships.
It’s worth noting that if your only income earned is through EI, you are not eligible to claim babysitting costs.
The maximum child care expenses you can claim each year is the lower of:
- Eligible child care expenses paid to providers
- 2/3 of your earned income
- The limits listed below:
– $4,000 per child (children age 7-16 that are not disabled)
– $7,000 per child (children under 7 that are not disabled)
– $10,000 for disabled children
Limitations for Students
There are also certain limitations for students.
Full time students can claim $100 per child (age 7-16), $175 per child (under age 7) or $250 (disabled children only) multiplied by the number ofweeks of full time schooling.
Part time students can claim $100 per child (age 7-16), $175 per child (under age 7) or $250 (disabled children only) multiplied by the number ofmonths of part time schooling.
Conclusion: child care expenses can add up and will reduce your taxes payable so it’s important to keep all receipts. Generally it makes sense for the lower income spouse to claim child care expenses.