Child care expenses can be deducted from income if you as the parent incur these expenses in the process of earning income from employment or business. If you are working in the day and need child care services you are entitled to a deduction for these expenses. Eligible expenses includes, but is not limited to, baby-sitting services, day nursery services and services provided at a boarding school or camp.
General Limitations
Child care expenses are subject to certain limitations listed below:
- The deduction is limited to the parent with the lower income unless this parent enrols in full-time or part time studies.
- The child must be under 16 years of age in the year the deduction is taken (a child who turned 16 in the year would be eligible).
- The child care expense payments cannot be made to related persons under the age of 18 or a person claimed as a dependant.
- Boarding school or camp expenses are limited to $175 per week for children under the age of 7, $250 for children with severe impairment, and $100 for other eligible children.
- Child care expenses must be substantiated by receipts and the social insurance number of the individual providing the services.
Annual Limit
- In addition to the above, the annual deduction is limited to the least of:
– The amount paid for the child care services:$4000 for each child 7 years of age or older, $7000 for each child under the age of 7 at year end, and $10,000 for each child with a severe impairment, and
– 2/3 of the earned income of the parent claiming the deduction.
Tax Tip: Payments to Relatives
Payments made to relatives for child care services are deductible if that person is 18 years of age or older and they are not claimed as a dependant. If the relative has no other sources of income, payments made may act as a form of subsidy and be beneficial from a tax perspective.
As Chartered Accountants in Toronto and Mississauga we can ensure all eligible child care expenses are claimed by you and your family. Contact a Chartered Accountant for more information and tax tips by email at info@srjca.com or call us at 647-725-2537 for consultation.