Becoming a parent can be one of the most incredible experiences we have, but it can also be very stressful. As parents there is a lot to think about when having a child surrounding their health, well-being and future, and of course, our financial responsibility for their care, feeding and education. To assist us with the costs of being a parent, the Canadian Revenue Agency (CRA) has provided a number of ways for families to save money through tax deductions and tax credits.
Child Care Expense Deduction
Child care is a deduction from gross income that you may make if you use daycare or babysitters, while you work or go to school. There are annual limits that vary with each child’s age and, if your child has a disability, a higher limit may be available. Any disability must be approved by the CRA to claim benefit.
You can claim the following childcare expenses incurred in the tax year:
- Caregivers such as nannies and babysitters
- 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 2/3rds of your earned income, to the following maximum amounts in tax-year 2019:
- $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
Transferred and Pooled Credits
In some cases, tax credits may have no effect on a taxpayer’s return, such as when they are already in refund status. In the case of families, many of these credits — all or the surplus portion — may be transferable to another family member, provided that this individual is either the child’s parent, or your spouse/common-law partner (and you are the child’s parent), or was the individual claiming an amount for the eligible child. In a situation like this, the child care expenses most often must be claimed by the person with the lower net income; the only variable is if one of the situations listed in Part C or Part D of form T778 applies.
The tuition tax credit can be claimed or carried forward by the student, or may be transferred to the student’s parent, grandparent or spouse, or student’s spouse’s parent or grandparent. For more details, go to this CRA link.
Medical expenses may be declared on family totals. To qualify, expenses must exceed the current level set by the CRA or 3 percent of net income, whichever amount is lower. For more details, go to this CRA link.
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With TurboTax Live Full Service, we can fully prepare and file your tax for you! Just upload your slips and receipts to your secure online account, we’ll prepare your return, review it with you then file it with the CRA – all without you having to leave the comfort of your home!