Building your Financial
Success
With Alain Aube
Tax Planning
Kid costs' tax
write-offs
The warmth and love of family life is priceless, but raising kids is
pricey - and getting costlier by the day. From birth to those final
steps into adulthood, parents are under constant pressure to provide for
clothing, food, education, entertainment, sports, music lessons and a
host of other items and activities with costs that seem to grow faster
than any child.
For working parents - or those attending school - the financial burden
is even heavier. In addition to all the normal costs of childhood,
working parents must come up with the extra cash to pay for such child
care expenses as baby-sitting or day nursery services.
Fortunately, the tax folks at the Canada Customs and Revenue Agency (CCRA)
have recognized that kids cost and allow working parents and students to
deduct certain child care expenses from their tax returns, under certain
conditions. Doing a little planning and
receipt-collecting along the way, you can ensure your child care claims
are accepted by the CCRA, and you might even be able to deduct other
'kid costs' that you hadn't even thought of - like day camp or summer
camp fees. It's all as easy as one, two, three … four:
1. Make sure you're eligible to claim child care expenses. Child care
expenses are the amounts you or another supporting person paid to have
someone look after an eligible child so you could earn an income,
operate a business or attend school. In two-parent families, child care
expenses are usually deducted by the spouse with the lower income.
Single parents can deduct child care expenses from their own income.
Common-law couples and same sex couples are treated the same as spouses
for the purposes of calculating child care expenses. Child care expenses
can also be deducted by single parents who are full-time students, and
by two-parent families where both parents are also students. Part-time
students receive a reduced child care deduction.
2. Know the child care expense limits that apply to your situation. For
single and two-parent families, the deduction for child care expenses is
limited to $7,000 for each child under seven at the end of the year,
$4,000 for each child over seven and under 16, or two-thirds or your
earned income. If you are entitled to claim a disability credit, your
child care deduction is $10,000 for a child under 17.
For parents attending school full-time, child care expenses are
deductible against all types of income to a maximum of $175 per week for
each child under seven and $100 per week for each child aged seven to 16
- but only for each week that the parent(s) attended school full-time.
Part-time students are limited to $175 per child under seven, and $100
per child aged seven to 16, for those months during which a part-time
education credit is claimed.
3. Send your kid to camp and save? Yes, it's true - under certain
circumstances, you may be able to claim child care expenses made to
boarding schools, overnight sports schools, camps where lodging is
involved and even day camps or day sports schools. These claims are
subject to your overall limits, of course, and to other restrictions.
For example, according to CCRA, an institution offering a 'sports study'
program is not a sports school so does not qualify; neither can you
claim fees for leisure or recreational activities, such as Cub Scouts or
tennis lessons.
4. Keep track of your expenses and report all your kids. CCRA requires a
receipt from each individual or organization that provided you with
child care services. So be sure you have proper receipts for all amounts
you claim or they could be denied. Also, be sure to report all children
under 17 even if you didn't incur child care costs for some of them. You
don't have to assign costs to each child, so reporting all your kids
could increase the amount you're eligible to claim.
Raising a family is personally rewarding and fiscally challenging. Talk
to your financial advisor about the many steps you can take to ease your
financial burden and help reach the life goals you've set for you and
your family.
