Child Care Expenses

If your family day includes children, remember to take advantage of childcare expenses this tax filing year. Childcare expense deductions are crucial for parents incurring expenses to work, carry on a business, attend school or a designated educational institution (full time or part time), or carry on research for which a grant was received.

How Much Can You Claim?

For the current tax year, the maximum amounts that can be claimed are as follows:

• $11,000 for a child eligible for the disability tax credit,
• $8,000 for children under age seven,
• $5,000 for children aged seven to sixteen.

These amounts are designed to provide significant tax relief for families, ensuring that parents can pursue their professional and educational goals without being overly burdened by childcare costs.

What Qualifies as Childcare Expenses?

Childcare expenses must be incurred in Canada (with certain exceptions) for an eligible child. Eligible expenses include payments to:

• Caregivers providing child care services,
• Day nursery schools and daycare centers,
• Educational institutions, for the part of the fees that relate to child care services,
• Day camps and day sports schools where the primary goal is to care for children,
• Boarding schools, overnight sports schools, or camps where lodging is involved.

If hiring an individual, such as a nanny, you become their employer and must handle income tax, CPP, EI deductions, and remittances, including employer portions. Your nanny is entitled to vacation pay, overtime, and sick leave, and you must file a T4 for them.

Who Cannot Provide Childcare?

• The individual providing childcare cannot be:
• The child’s parent or a supporting person,
• Someone for whom you or another person has claimed a tax credit under section 118 for the year,
• Under 18 and related to you by blood, marriage, common-law partnership, or adoption.

Who Qualifies for Childcare Expense Deductions?

An eligible child is defined as a child of the taxpayer or the taxpayer’s spouse or common-law partner, or a child dependent on the taxpayer or the taxpayer’s spouse or common-law partner for support, provided the child is under 16 years of age or dependent due to a mental or physical infirmity. The child must have lived with you when the expense was incurred.

Conclusion

Taking advantage of childcare expense deductions can significantly reduce your tax burden, allowing for more strategic tax planning. It’s essential to stay informed about the current year’s tax laws and regulations to maximize your benefits. For personalized advice and assistance with your tax filings and planning strategy, consider consulting with a professional accounting firm. They can provide tailored guidance to ensure you’re making the most of your tax opportunities.

This information is for discussion purposes only and should not be considered professional advice. There is no guarantee or warrant of information on this site and it should be noted that rules and laws change regularly. You should consult a professional before considering implementing or taking any action based on information on this site. Call our team for a consultation before taking any action. ©2024 Shajani CPA.

Shajani CPA is a CPA Calgary, Edmonton and Red Deer firm and provides Accountant, Bookkeeping, Tax Advice and Tax Planning service.