Filing Your Return -> Disabilities -> Child Care Costs
Income Tax Act s. 63
Line 214 Child Care Expenses
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. 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 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 ($11,809 in 2018, $11,635 in 2017). 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. 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.
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
Thus, if you have 3 children ages 5, 7 and 15, your total claim for 2017 or 2018 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 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):
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.
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.
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 2017 or 2018 Tax Year
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 2018 taxation year, even though there is no longer a child amount tax credit, you input all dependent children even if there are no child care costs for one of the children, so that the maximum allowable can be properly calculated.
Provincial Claims for Child Care Costs
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.
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
CRA Resources:- Line 214 Child Care Expenses
- S1-F3-C1: Child Care Expense Deduction - updated as of December 12, 2018
See also:- Tax Information for Students
Tax Tip: Input all dependent children into your tax software - even the ones with no child care costs, so maximum allowable is properly calculated.
Revised: December 14, 2018
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