Follow TaxTips.ca: Add us as a preferred source on Google.
Child Care Costs are Claimed as a Deduction From Income
Child Care Costs in Canadian Tax Calculator
Who Claims the Child Care Costs?
Eligible Child for Child Care Costs
Eligible Child Care Expense Examples
Child Care Services Provided by a Relative
Basic Annual Limit for Each Child for Child Care Expenses
Provincial Claims for Child Care Costs
Canada Revenue Agency (CRA) Resources
Child care costs are not claimed as a non-refundable tax credit, but as a deduction from income on the personal tax return. A non-refundable tax credit is always at the lowest tax rate (except in Quebec), but a reduction of income would save tax at the taxpayer's marginal tax rate.
In the Canadian Tax Calculator, child care costs are entered in the deductions area. The calculator does not check to ensure that the maximum allowable amount is not exceeded. It will provide a warning if the child care costs are being claimed by a higher income spouse.
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 for at least 90 days and are separated at the end of the year, each parent may claim the portion of the child care costs that they have paid.
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.
Where the lower-income spouse is a student at a designated education institution or secondary school and enrolled in a full-time or part-time educational program, then the costs may be claimed by the higher income spouse.
See CRA's Higher Income Taxpayer in Income Tax Folio S1-F3-C1.
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 is less than or equal to the federal basic personal amount. 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 (earned 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
For a Tax Court case which ruled in favour of the parent regarding types of expenses qualifying as child care costs, see Kwan v. The Queen 2018 TCC 184.
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:
See the Canada Caregiver Credit article re the above tax credits.
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.
| Eligible children: | Basic Limit | |
| 1. | Age 6 or less at the end of the tax year, for whom the disability amount cannot be claimed | $8,000 |
| 2. | Any age, for whom the disability amount can be claimed | 11,000 |
| 3. | Age 7 to 16 at the end of the tax year, for whom the disability amount cannot be claimed | 5,000 |
| 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 |
Thus, if you have 3 children ages 5, 7 and 15, your total claim for the year would be limited to $18,000 ($8,000 + 2 x $5,000). See example below.
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 the periodic child care expense amount, which is defined in ITA 63(3) as1/40th of the annual child care expense amount (basic limit, above):
The claim for child care expenses cannot exceed two-thirds of your earned income for the year.
The above limits can be found in the Canada Revenue Agency (CRA) form T778 Child Care Expenses, which is filed with the tax return to make a claim for child care costs. The T778 also includes the definition of earned income, which has been revised for 2020 and 2021.
If your costs exceed the allowable limit, a tax credit may be available for some of the costs through the child fitness tax credit (only available in MB and YT after 2016). 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.
Re COVID-19, for 2020 and 2021:
Earned income will include:
Form T778 Child Care Expenses includes the list of what is included in earned income.
This measure is included in Bill C-30, Budget Amendment Act 2021, No. 1, which received Royal Assent June 29, 2021.
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 2017 or later taxation year, even though there is no longer a child amount tax credit, that you input all dependent children even if there are no child care costs for one or more of the children, so that the maximum allowable can be properly calculated.
Because the child care costs are claimed as a deduction from income, this reduces both federal and provincial taxes payable.
In Newfoundland and Labrador, there is a non-refundable child care tax credit in addition to the deduction from income. The tax credit is claimed by the individual who claims the child care costs. The tax credit is calculated by multiplying the child care costs by the lowest personal tax rate.
Ontario has a new Childcare Access and Relief from Expenses (CARE) refundable tax credit starting with the 2019 taxation year.
S1-F3-C1: Child Care Expense Deduction
Tax Tip: Input all dependent children into your tax software - even the ones with no child care costs, so maximum allowable is properly calculated.