Childcare Expense Deduction: Complete Guide

Annual Deduction Limits

Maximum amounts you can claim per child depend on the child's age:

Age is determined as of December 31 of the tax year.

Types of Eligible Childcare

• Licensed daycare centres: Full-time or part-time programs
• Home daycares: Licensed or unlicensed caregivers
• Nannies and babysitters: In-home care providers
• Before/after school programs: Care during work hours
• Day camps: Including sports camps (not overnight)
• Boarding schools: Child's portion only (limited)
• Overnight camps: Limited to $200-$275 per week

Camp Limits

• Day camps: Full deduction up to annual limit
• Overnight camps: $200/week (regular), $275/week (disabled child)

What Doesn't Qualify

• Medical or hospital care
• Clothing, food, or transportation
• Education or tutoring fees
• Payments to the child's parent
• Payments to related persons under 18
• Recreational activities not primarily for childcare

Who Can Claim

Two-Parent Families

The lower-income spouse must claim childcare expenses, UNLESS that spouse:

• Was enrolled in school full-time
• Was unable to care for children due to disability
• Was confined to prison for at least 2 weeks
• Was in a hospital for at least 2 weeks
• Lived apart from higher-income spouse for at least 90 days due to breakdown

Single Parents

The single parent claims all childcare expenses on their return.

Shared Custody

Each parent claims expenses they paid during their custody period, up to their individual limits.

Income Limitation

The childcare deduction is also limited to 2/3 of earned income for the lower-income spouse. Earned income includes:

• Employment income (before deductions)
• Self-employment income
• Research grants
• Disability pension under CPP/QPP

Example

If the lower-income spouse has earned income of $15,000:

• Maximum claim: $15,000 × 2/3 = $10,000
• If child is under 7 with $12,000 in daycare costs, claim is limited to $10,000

When Higher-Income Spouse Can Claim

If the lower-income spouse has one of these situations, the higher-income spouse can claim for those weeks/months:

Full-Time Student

Higher earner can claim up to:

• $200/week per child under 7
• $125/week per child 7-16
• $275/week per child with disability

Incapacity, Prison, or Separation

Similar weekly limits apply when lower-income spouse is unable to provide care.

Required Receipts

You must obtain receipts showing:

• Care provider's name and address
• Provider's Social Insurance Number (or business number)
• Amount paid
• Dates of care
• Child's name

Claiming Process

1. Gather all childcare receipts
2. Calculate total paid per child
3. Apply annual limits based on age
4. Check 2/3 earned income limit
5. Report on Line 21400 of lower-income spouse's return

Example Calculation

The Smiths have two children and paid these childcare costs:

• Emma (age 4): $10,000 daycare
• Jack (age 9): $3,000 after-school program + $1,500 summer camp

Lower-income spouse earned $45,000:

• Emma: Limited to $8,000 (under 7 limit)
• Jack: $4,500 (under $5,000 limit)
• Total eligible: $12,500
• 2/3 income test: $45,000 × 2/3 = $30,000 (not limiting)
• Deduction claimed: $12,500

Quebec Childcare

Quebec residents have different rules:

• Federal deduction still applies
• Quebec offers a refundable tax credit instead of provincial deduction
• Credit rate varies by income (26-75%)
• Subsidized daycare ($8.70/day) already has tax benefit built in

Common Mistakes to Avoid

• Wrong spouse claiming: Must be lower-income unless exception applies
• Missing SIN: Get provider's SIN for receipts
• Exceeding limits: Check both annual and earned income limits
• Counting education: Tutoring and school fees don't count
• Forgetting camp limits: Overnight camps have lower weekly limits

Documentation to Keep

Maintain these records for 6 years:

• All childcare receipts with provider SIN
• Registration forms showing dates of care
• Bank statements or cancelled cheques
• Proof of payment for each provider

Tax Planning Tips

• Time expenses strategically: Prepaying January daycare in December doesn't help—claim in year care is provided
• Consider RRSP contributions: Lower-income spouse's RRSP contributions reduce income, potentially shifting claim to higher earner
• Keep summer camp receipts: Day camps count toward annual limit
• Don't overlook babysitters: Occasional babysitting for work counts too