Childcare expenses

Eligible childcare costs include daycare or babysitting, boarding school and certain camp expenses. Medical expenses, education costs, clothing and transportation expenses are not eligible. You are also not allowed to deduct payments made to persons under 18 years of age who are related to you.

Tax tip: After-school recreational programs can qualify as an eligible childcare expense if the fees are incurred to allow the parent to work. For example, a parent who pays reasonable fees to a gymnastics club for after-school classes may be allowed to claim the amount as a childcare expense provided that the parent needed to make the arrangements for the care of the child after school until she finished work.

Who claims the childcare costs?

When the child lives with both parents, the parent with the lower net income must claim the expense deduction. A parent with no income is considered to have the lower income and, therefore, must claim the expenses. The supporting parent with the higher income may claim a deduction only during the period in which the lower income spouse or common-law partner is mentally or physically infirm, confined to a bed or a wheelchair, attending full- time at a secondary school or a designated educational institution or incarcerated in a correctional facility.

The amount that can be claimed for childcare is subject to special rules when the lower income spouse or common- law partner is in part-time attendance at a designated educational institution. Special rules also apply for single parents and those who have separated during the year or are divorced.

How much can you deduct?

In general20, you can deduct up to $8,000 annually for each child who is aged six or under at the end of the year, and up to $5,000 for each child aged seven to 15 at any time in the year. This limit is increased to $11,000 annually for each child who is eligible for the disability tax credit (see topic 80). In general, the total deduction cannot exceed two-thirds of the salary or business income of the parent who is required to claim the deduction. However, it’s limited by the actual amounts paid in the year for childcare.

20 For 2014 and prior years, these annual limits were up to $7,000 for children age six or under, up to $4,000 for each child age seven to 15 and up to $10,000 for children eligible for the disability tax credit.