Child Care Expenses

By Randall Orser | Personal Income Tax

You decided to have kids, and while your taxes weren’t in the thought process at the time, you may as well benefit tax wise from them now.

What are child care expenses?

Child care expenses are amounts you or another person paid to have someone look after an eligible child so that you or the other person could:

  • earn income from employment;
  • carry on a business either alone or as an active partner;
  • attend school under the conditions identified under Educational program; or
  • carry on research or similar work, for which you or the other person received a grant.

The child must have lived with you or the other person when the expense was incurred for the expense to qualify. Usually, you can only deduct payments for services provided in Canada by a Canadian resident.

Who can claim child care expenses?

If you are the only person supporting the eligible child, you can claim child care expenses you incurred while the eligible child was living with you. Fill out parts A and B, and, if it applies, Part D of Form T778, Child Care Expenses Deduction.

There may have been another person who lived with you at any time in 2016 and at any time during the first 60 days of 2017 who was: the eligible child's parent; your spouse or common-law partner, if you are the father or the mother of the eligible child; or an individual claiming an amount for the eligible child on line 305, 306, 315, or 367 of their Schedule 1, Federal Tax.

In this situation, the person with the lower net income (including zero income) must fill out parts A and B and claim the child care expenses unless one of the situations in Part C or D applies.

If any of the situations in Part C or Part D apply, the child care expenses can be claimed by the person with the higher net income, or in part by both the person with the higher net income and the person with the lower net income. In this situation, the person with the higher net income must calculate the claim first. However, you must each fill out a separate Form T778, and fill out parts A and B, and, if it applies, parts C and D.

If both of you have equal net incomes, you have to agree on which one of you will claim the child care expenses.

If you got married or became a common-law partner in 2016, you and your spouse or common-law partner have to consider your net incomes for the whole year. Include child care expenses you both paid for the whole year.

For whom can you claim child care expenses?

Child care expenses can only be claimed for an eligible child.

An eligible child is: your or your spouse's or common-law partner's child; or a child who was dependent on you or your spouse or common-law partner, and whose net income in 2016 was $11,474 or less.

The child must have been under 16 years of age at some time in the year. However, the age limit does not apply if the child was mentally or physically infirm and dependent on you or your spouse or common-law partner.

What payments can you claim?

You can claim child care expenses that were incurred for services provided in 2016. These include payments made to:

  • caregivers providing child care services;
  • day nursery schools and daycare centres;
  • educational institutions, for the part of the fees that relate to child care services;
  • day camps and day sports schools where the primary goal of the camp is to care for children (an institution offering a sports study program is not a sports school); or
  • boarding schools, overnight sports schools, or camps where lodging is involved (read the note in Part A of Form T778, Child Care Expenses Deduction).

The above is not an exhaustive list of deductible child care expenses. For example, advertising expenses and placement agency fees incurred to locate a child care provider and mandatory registration fees may also qualify as child care expenses.

When the child care services are provided by an individual, the individual cannot be:

  • the eligible child's father or mother;
  • another person;
  • a person for whom you or another person claimed an amount on line 305, 306, 315, or 367 of Schedule 1, Federal Tax; or
  • a person under 18 years of age who is related to you.

A person is related to you if he or she is connected to you by a blood relationship, marriage or common-law partnership, or adoption. For example, your brother, sister, brother-in-law, sister-in-law, and your or your spouse's or common-law partner's child are related to you. However, your niece, nephew, aunt, and uncle are not.

What payments you cannot claim?

You cannot claim payments for:

  • medical or hospital care, clothing, or transportation costs;
  • fees that relate to education costs at an educational institution, such as tuition fees of a regular program or a sports study program; and
  • fees for leisure or recreational activities, such as tennis lessons or the annual registration for Scouts.

You cannot claim expenses for which you or another person received, or is entitled to receive, a reimbursement of the child care expenses or any other form of assistance not included in income. This includes, for example, the hiring credit for small business and small business job credit received under the Employment Insurance Act. If your employer paid the child care expenses on your behalf, you can claim the part of the expenses included in your income for the year.

Completing your tax return

Use Form T778, Child Care Expenses Deduction, to calculate your allowable amount of child care expenses. Enter on line 214 of your return the amount that you can claim.

The individual or organization who received the payments must give you a receipt showing information about the services provided. When the child care services are provided by an individual, you will need the social insurance number of the individual. The receipt can be in your name or that of your spouse or common-law partner.

You cannot carry forward unclaimed expenses to another year.

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