- Child care costs are a deduction from income for tax purposes rather than a tax credit. This allows the taxpayer to use these expenses to save tax at the taxpayer's marginal tax rate rather than at the lowest tax rate, i.e. where non-refundable tax credits are available. Generally, the child care costs are claimed by the parent with the lower net income for tax purposes. In the event that parents are separated, then each parent can claim a portion of the costs, where agreed upon.
- The claim included on your personal tax return is the lessor of three amounts: 1) the basic annual limit; 2) the actual cost of child care; and 3) 2/3 of earned income.
- The basic annual limits have been
increased by $1,000 for the 2015 year. That means:
a child 6 and under, where no disability tax credit is claimed is $8,000;
ii) a child between 7 and 16, where no disability tax credit is claimed, is $5,000; and
iii) a child of any age, where the disability tax credit is claimed is $11,000. - Child care expenses for boarding school or an overnight camp are also eligible to claim as child care expenses. However, these types of child care expenses are limited to a maximum claim per week. Click here for more information about the child care expense deduction
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.