Whether you are a student or working and paying for child care, those expenditures may be deductible and the maximum amount you can claim has increased this year. It’s a lucrative year end tip advisors will want to prime their clients about, to maximize child care expense claims on the 2015 tax return.
The maximum claim for child care expenses is linked to qualifying income. This maximum is the least of:
- the eligible child care expenses paid to eligible child care providers
- two-thirds of earned income (which does not include Employment Insurance benefits) and
- the following limits, which have risen by $1,000 in 2015:
- $5,000 for each child aged seven to 16 for which the Disability Amount cannot be claimed
- $8,000 for each child under seven for which the Disability Amount cannot be claimed
- $11,000 for each disabled child
For the purposes of claiming child care, an eligible child must be a child of the taxpayer, the taxpayer’s spouse or the taxpayer’s common-law partner or a child who was dependent on the taxpayer, the taxpayer’s spouse or common-law partner.
The definition of child includes an adopted child or the spouse of a child of the taxpayer. Also, if the child is not a child of the taxpayer or their spouse or common-law partner, the child’s net income must be less than the Basic Personal Amount; that’s $11,327 this year.
Child care must be for services provided in Canada (although special rules exist for deemed residents and US-Canada commuters) by: a day nursery school or day-care centre, a day camp or day sports school, a boarding school or camp (including a sports school where lodging is involved), or an educational institution for the purpose of providing child care services.
You may also pay deductible child care to an individual who is not the child’s father or mother, a supporting person of the child, a person in respect of whom the taxpayer or a supporting person of the child has claimed a personal amount or a person who is under 18 years of age and related to the taxpayer.
Baby-sitting costs, day-care costs, costs of a live-in nanny (which may include advertising, salary and benefits including the employer’s portion of CPP and EI) and lodging paid at boarding schools, day camps, overnight sports schools and overnight camps can all be claimed, but in the case of day and over-night camps you can’t claim more than $125 per week for each child age seven to 16, plus $200 per week per child under seven plus $275 per week for each disabled child.
For Students Who Are Parents, there are additional limitations. Full-time students are limited in their claims to:
- $125 for each child age seven to 16 for which the Disability Amount cannot be claimed, plus
- $200 per child under seven for which the Disability Amount cannot be claimed, plus
- $275 per disabled child
times the number of weeks of full-time attendance. Part-time students are limited to these amounts times the number of months of part-time attendance.
And there is more good news: Some of your expenses may be eligible for both the Children’s Fitness Amount, which is refundable in 2015—so even very low earners can benefit—and the deduction for child care expenses. In that case, the expenses must first be claimed as child care expenses. Only the unused amount after claiming child care expenses may be claimed for the fitness credit amount.
For more information, be sure to discuss this lucrative claim with your Tax Services Specialist.