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January 18, 2017 / by riyadeol / Uncategorized / No Comments

Are child care expenses deductible?

Child care costs are not claimed as a non-refundable tax credit, but as a deduction from income on line 214 of the personal tax return.

In most cases, child care expenses for an eligible child must be claimed by the parent with the lower net income for tax purposes.  If the parents are separated and share custody, sometimes each parent may claim a portion of the child care costs.  Where a medical doctor certifies in writing that the lower-income spouse is incapable of caring for the child due to a physical or mental infirmity, then the costs may be claimed by the higher income spouse.

An eligible child is a child of you or your spouse or common-law partner, or a child who was dependent on you or your spouse or common-law partner, and whose net income in the year was less than or equal to the federal basic personal amount ($11,138 in 2014, $11,327 in 2015).  The child must have been under 16 years of age at the beginning of the year, unless the child was mentally or physically infirm.

Allowable child care expenses are those paid for the care of an eligible child, to enable the parent to earn employment income, carry on a business, attend an eligible program at a designated educational institution for at least 3 consecutive weeks, or carry on research or similar work for which a grant has been received.  Some examples of eligible child care expenses include day-care centres and day nursery schools, some individuals providing child care services, day camps and day sports schools, educational institutions such as private schools (the portion of tuition costs relating to child care services), boarding schools, and overnight sports schools and camps.

There are limits on the total amount of child care expenses that can be claimed for each child.  There are also limits on the amounts that can be claimed for expenses related to boarding schools or overnight camps.

Basic Annual Limit for Each Child for Child Care Expenses

Eligible children: Basic Limit
2015+ 2014
1. Age 6 or less at the end of the tax year, for whom the disability amount cannot be claimed $8,000 $7,000
2. Any age, for whom the disability amount can be claimed 11,000 10,000
3. Age 7 to 16 at the end of the tax year, for whom the disability amount cannot be claimed 5,000 4,000
4. Over 16 at the end of the tax year, with a mental or physical impairment, for whom the disability amount cannot be claimed 5,000 4,000

Thus, if you have 3 children ages 5, 7 and 15, your total claim for 2015 or 2016 would be limited to $18,000 ($8,000 + 2 x $5,000).  See example below.

Maximum Weekly Claim for Certain Child Care Expenses

The maximum that can be claimed for expenses for a stay in a boarding school (other than education costs) or an overnight camp (including an overnight sports school) is:

·         $175 per week for a child in line 1 above
·         $250 per week for a child in line 2 above, and
·         $100 per week for a child in lines 3 or 4 above.

 

Annual Limit for Child Care Expenses Based on Income

The claim for child care expenses cannot exceed two-thirds of your earned income for the year.

If your costs exceed the allowable limit, a tax credit may be available for some of the costs through the child fitness tax credit.  Any eligible fitness costs which qualify as child care costs must first be claimed as child care costs, with the remainder of eligible costs then claimed through the fitness credit.

Child Care Costs Deduction Example for 2015 or 2016 Tax Year

·         3 children ages 5, 7 and 15, so total claim cannot exceed $18,000 ($8,000 + $5,000 x 2)
·         spouse with lower net income has earned income of $30,000, so claim cannot exceed $20,000 (2/3 x $30,000)
·         actual child care costs are $8,000 each for the 5 and 7-year-old, and zero for the 15-year-old, for a total of $16,000

The allowable deduction is the lesser of $18,000, $20,000 and $16,000, so is $16,000.  When using tax software, make sure that you input the full amount of the child care costs for each child.  Also, make sure that for the 2015 or 2016 taxation year, when there is no longer a child amount tax credit, you input all dependent children even if there are no child care costs, so that the maximum allowable can be properly calculated.

Child Care Services Provided by a Relative

Costs for child care services provided by a person 18 or over who is related to you are eligible as child care expenses, as long as you or another person did not claim a tax credit for that person in the following categories of the personal tax return:

·         line 305 – amount for an eligible dependent
·         line 306 – amount for infirm dependents age 18 or over
·         line 315 – caregiver amount

 

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