The Child Care Expense Deduction (CCED) allows childcare expenses to be deducted from income when those expenses are incurred to allow a supporting parent to earn employment or business income.
Eligible childcare costs include daycare or babysitting, boarding school and certain camp expenses. Medical expenses, education costs, clothing and transportation expenses are not eligible. You are also not allowed to deduct payments made to persons under 18 years of age who are related to you. After-school recreational programs can also qualify as an eligible childcare expense if the fees are incurred to allow you to work. For example, if you pay reasonable fees to a gymnastics club for after-school classes, you may be allowed to claim the amount as a childcare expense, provided you need to make the arrangements for the care of your child after school until you’re finished work.
Generally, where the child lives with both parents, the lower income spouse must claim the expense deduction. However, the parent with the higher income may claim the deduction during the period in which the lower income spouse or common-law partner is mentally or physically infirm, confined to a bed or a wheelchair, attending full time at a secondary school or a designated educational institution, or incarcerated in a correctional facility.
Special rules also apply for single parents and those who have separated during the year or are divorced.
The maximum amount that can be claimed under the CCED each year is increased by $1,000 for 2015 and subsequent years—i.e., to $8,000 from $7,000 per child under age seven, to $5,000 from $4,000 for each child aged seven through 16 (and for infirm dependent children over age 16) and to $11,000 from $10,000 for children who are eligible for the Disability Tax Credit. These maximum limits are subject to the additional condition that the total deduction cannot exceed two-thirds of the salary or business income of the parent who is required to claim the deduction.
Keep these increased limits in mind for 2015. Also, with the summer coming, remember to save your receipts for summer camp expenses where these amounts are incurred to allow you to earn employment or business income. Payments made to day and residential camps are eligible for the deduction; however, the maximum amount that can be claimed for an overnight camp1 is $175 per week for each child under age seven, $100 per week for each child aged seven through 16 (and for infirm dependent children over age 16) and $250 per week for a child who is eligible for the disability tax credit. These same limits also apply to certain boarding school costs.
1 To qualify for a deduction, the camp must be located in Canada.