Child care expenses

Child Care expenses are an incurred expense for services rendered in the taxation year, to provide childcare services for any eligible families with children 16 and under. These services were provided to enable families, or the person supporting the child, for the year:

To perform the duties of an office or employment

To carry on a business either alone, or as a partner actively engaged in the business

To carry on research, or any similar work, for which the taxpayer or supporting person received a grant

The cost of caring for children is allowed as a deduction for tax purposes from the income of a working parent. Form T778 must be completed and attached with the tax return to claim child care expenses.

Watch the video below to learn more about how to report Child Care Expenses by using TaxTron Web:

Who is an Eligible Child for T778?

An eligible child includes:

A child of the taxpayer and spouse

A child under 16 years at some point during the year

A child who was dependant on the taxpayer due to disability, for whom there is a signed form; T2201 Disability Tax Credit Certificate

A child’s net income must not exceed the basic personal amount

It is required that an eligible child must be in the custody of the person claiming the child care deduction. Child care expenses qualify for a deduction by a taxpayer in any case where the expenses are related to any eligible child.

Eligible and Non-Eligible Payments To claim child care expenses as deductions, the child care payments must be made to:

An eligible person providing the child care services

A day nursery school or day-care centre

A day camp or day sports school

A boarding school or camp (including a sports school where lodging is involved)

An educational institution that provides child care services. When an educational institution offers child care as well as an educational program, only the portion of the fees paid to the institution relating to child care (i.e., supervision before and after classes or during the lunch period) may qualify as child care expenses. However, when the payment made is for a child under the compulsory school age, the services being provided are generally considered child care rather than education unless the facts indicate otherwise

Payments must be made to a resident of Canada

The individual must be 18 or over when payments are made to a related person

Fees paid to the placement agency to find a suitable nanny

Child care expenses are not deductible when payments are made to:

A father/mother of the child or a supporting person

A person for whom the taxpayer or another supporting person claimed an amount on line 30425, 30400 or 30450 or 30500 of Part A Federal non-refundable tax credits

Payments made to a person under 18 who is related to the taxpayer or supporting person

For more information on how much you can deduct for tax purposes, please continue to the next blog!