Child Care Expenses – Tax Benefits & Tips
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 dependent. 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.