Over the last few years, the demand for childcare has risen tremendously as more and more parents join the workforce. As employment rates go up and cost of living forces more families to have dual-income earners, childcare has become a necessity. To add to this, finding the most appropriate childcare arrangement is even more challenging. Parents looks for convenience, quality, availability, and – most importantly – affordability.
Average Cost for Childcare in Canada
Studies conducted on childcare costs across the 28 biggest cities examined the median prices for infants, toddlers and preschoolers. The most expensive cities were Toronto and Vancouver, while the least costly cities across Manitoba, Quebec and Prince Edward Island.
For infants, highest and lowest childcare costs were as follows:
- $1,649 per month in Toronto
- $1,454 per month in Markham
- $1,363 per month in Vaughn
- $164 per month in Montreal
For toddlers and preschoolers, the figures are somewhat similar:
- $1,375 per month in Toronto
- $1,325 per month Vancouver
- $1,210 per month Richmond
- $164 per month in Montreal
- $451 per month in Winnipeg
- $179 per month in Quebec City
Just to put things into perspective, paying for a year’s worth of childcare in cities like Toronto and Vancouver costs more than a year of university tuition fees. Check out our post on tax tips for new parents and learn more about benefits, deductions and credits for your new baby.
What Counts as Daycare Expenses?
As per the Canada Revenue Agency, childcare expenses are amounts you or another person paid to have someone look after an eligible child so that you or the other person could:
- Earn income from employment
- Carry on a business either alone or as an active partner
- Attend school under the conditions identified under Educational Program
- Carry on research or similar work, for which you or the other person received a grant.
The child must have lived with you or the other person when the expense was incurred for the expense to qualify. Unless you count as one of the exceptions, it is usually the spouse with the lower income who can claim childcare expenses. Single parents also can claim childcare expenses.
Read more about eligibility requirements on the Canada Revenue Agency’s website here.
Tax Benefits for Childcare
Your childcare expenses can be claimed on your tax return, which can reduce the amount of tax you have to pay. However, meeting the eligibility requirements for each child whose expenses are claimed is a mandatory requirement.
Basic Eligibility Criteria
In order to claim expenses for a child, they must:
- Be younger than 16 years of age
- Be yours, your common-law partner’s, or your spouse’s
- Be dependent on you, your common-law partner, or your spouse
- Have annual income that doesn’t exceed $11,327
If your child is disabled, there is no age restriction as long as they are dependent on you, your spouse, or partner. Read this informative post on who you can claim as a dependant on your tax return.
You can claim the following childcare expenses incurred in 2016:
- Caregivers such as nannies and baby-sitters
- Day nursery schools and daycare centres
- Educational institutions that provide childcare services
- Day camps and day sports schools with a primary goal of childcare
- Boarding schools, overnight sports schools, or camps where lodging is involved
You may also claim advertising or placement agency costs incurred to locate a childcare specialist. Click on this link for more information on other childcare expense deductions.
What important to note is that if you pay an individual person – such as a nanny or babysitter – for childcare, you must provide their Social Insurance Number as well as all related receipts. A good tip to follow is asking for these ahead of time instead of at the end of the year.
As a Canadian taxpayer, you can claim (up to) the following amounts:
- $8,000 per child under 7
- $5,000 per child between 7 to 16
- $11,000 for disabled, dependent children who qualify for the disability tax credit
- $5,000 for a disabled child over 16 who does not qualify for the disability tax credit but is still dependent on you
For a boarding school or overnight camp that provides childcare, you may only claim the following amounts (up to):
- $200 per week for a child under 7
- $125 per week for a child 7 and 16
- $275 per week for an eligible disabled child
The following are some of the costs that won’t count as childcare expenses, which cannot claim on your tax return:
- Medical or hospital care, clothing, or transportation costs (unless the costs are related to daycare pick up and drop off for your child)
- Education costs such as tuition fees of a regular or sports study program
- Fees for leisure or recreational activities, such as annual registration for Scouts
It might sound daunting to find each and every credit and expense you can claim on your tax return, but don’t forget that filing with TurboTax is the easiest way to file your return accurately. As Canada’s #1 tax software, we guarantee you the biggest tax refund possible, so sign up or continue your return with us today.