Page 39 - A Canuck's Guide to Financial Literacy 2020

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Child Care Deduction

Raising a child is expensive and can take a toll on your finances if you’re not prepared.
Child care is occasionally one of the biggest expense parents face after their rent or
mortgage. The average monthly cost of daycare in Toronto is $1,675, up to 10x more than
the cost in Montreal. Parents need to be aware that they may be eligible to deduct child
care expenses and free up their cash flow. This is especially true if child care expenses are
necessary in order for the parents to generate an income.

Qualifying for Deduction

Childcare expenses can be deducted if you or your spouse paid to have someone take care
of your child in order to:

▪ Earn an income
▪ Run your business
▪ Attend school

Be aware that “child” means anyone under the age of 16 with a net income of $12,069 or
less. If the child suffers from mental or physical conditions then there is no age limit.

What constitutes as an expense you may ask?

▪ Childcare services provided by caregivers
▪ Childcare services provided by educational institutions
▪ Day nursery schools
▪ Daycare centers
▪ Day camps and day sports school providing care for the children
▪ Boarding schools or camps where accommodation is provided

Amount of Deduction

As of 2020, parents are able to deduct up to

▪ $8,000 for children under age of 7
▪ $5,000 for children aged 7 through 16
▪ $11,000 for children who are receiving the disability tax credit

The deduction must be claimed by the lower income spouse and is limited to the lower of:

▪ 2/3 of their earned income
▪ Total Cost of Daycare