You can use form T778: Child care expenses deduction to claim child care expenses you paid for your child(ren) in 2018.
Generally speaking, child care expenses are incurred when you or your spouse or common-law partner pay someone to look after an eligible child so that you (or both of you) can:
- Earn income from employment
- Carry on a business either alone or as an active partner
- Attend school (certain conditions apply) or
- Carry on research or similar work, for which you received a grant
In order for your expenses to qualify, you or your spouse must have paid for child care expenses while the child lived with you. As a rule, only the payments for services provided in Canada by a Canadian resident can be deducted.
If you’re married or in a common-law relationship, the person with the lower net income must be the one to claim the child care expenses. However, there are certain situations that allow the person with the higher net income to claim these expenses. Refer to Part C or D of form T778 to see if any of these scenarios apply to you.
Remember: You'll need your receipts to claim your child care expenses! Every receipt needs to be made out to the person who paid for the child care expenses. If the child care services were provided by an individual, the receipt should also show the caregiver's SIN (Social Insurance Number). You don't have to submit your receipts if you're filing electronically, but you do need to keep them in case the Canada Revenue Agency (CRA) asks to see them.
Note: If you're a resident of Newfoundland and Labrador and you qualify to claim the federal child care expenses amount, you’re also entitled to claim the Newfoundland and Labrador child care amount. H&R Block’s tax software will automatically apply this credit to your return based on the information you entered on the T778 page.
You can claim the cost of the following child care services:
- Child care services provided by caregivers (including babysitters and nannies)
- Nursery schools and daycare centres
- Child care services provided by educational institutions (only the part of your fees related to child care can be claimed)
- Day camps and day sports schools where the primary goal of the camp is to care for children (an institution offering a sports study program is not a sports school) or
- Boarding schools, overnight sports schools, or camps where accommodation is involved
Note: This isn’t a complete list. For example, you can also claim the cost of advertising expenses or placement agency fees paid to hire a nanny. For more information on which expenses you can claim, visit the CRA website.
If the child care is provided by an individual, he or she can’t be:
- the child’s parent
- your spouse, if you’re the father or mother of the child
- a person for whom you or another person claimed any of the following amounts
- a person under 18 years of age who is related to you by blood, marriage or common-law partnership, or adoption. For example, your brother, sister, brother-in-law, sister-in-law are related to you; your niece, nephew, uncle, and aunt are not.
How much can I claim?
The maximum amount you can claim is:
- $8,000 for each child under 7 years of age at the end of the year
- $5,000 for each child between 7 and 16 years of age
- $11,000 for each child who qualifies for the disability tax credit
The maximum amount you can claim also depends on your earned income for the year. As a rule, you can only claim an amount that doesn’t exceed 2/3 of your earned income.
Example: In 2018, your earned income for the year was $40,000. In order to work, you paid $ 20,000 in child care expenses for your three children ages 2, 9, and 11. The maximum you will be able to claim would be the lesser of:
- 2/3 of your earned income i.e. $40,000 X (2/3) = $24,000
- Maximum claimable amount i.e. ($8,000 + (2 X $5,000)) = $18,000
- Actual amount paid i.e. $20,000
In this case, you’ll be able to claim $18,000 in child care expenses on your return.
Tax tip: Make sure you enter the full amount of child care expenses you paid in the tax software for each child. Using the example above, let’s say you no longer have childcare expenses for your 11-year-old, but you’ve paid $15,000 in child care expenses for your other children, you’ll still be able to claim the full amount you’ve paid instead of the maximum allowable of $13,000 ($8,000 +$5,000). That’s because the more eligible children you have, the higher your allowable amount, even if you don’t have child care expenses for some of them.
You’ll need to enter the amount(s) from your RL-24 slip or receipts issued by an individual child care provider into the T778 page to claim your federal deduction for child care expenses. For certain child care expenses, your RL-24 slip might include a note specifying the amount that can be used to claim the federal deduction. If that’s the case, enter this amount on your T778 page; otherwise, enter the amount shown in box C of your slip.
Note: H&R Block's tax software will automatically complete the Schedule C form for you based on the amounts you enter on the RL-24 and the T778 page.
My child care expenses also qualify for the provincial fitness or the arts amount
According to the CRA, if you paid an amount that qualifies as child care expenses and the provincial children’s fitness/physical activity/sports or arts amount, you must first claim the amount as a child care expense. Any unused amount can then be applied towards the provincial children’s fitness/physical activity/sports or arts amounts.
Note: The federal children’s fitness and arts amounts have been eliminated for 2017 and subsequent tax years.
I received Employment Insurance (EI) benefits during the year. Can I still claim child care expenses on my return?
You can, but it’s important to remember that any child care expenses you might’ve paid can only be applied against your earned income – income that is received from:
- Self-employment activities and
- Scholarships, research grants, etc.
Let’s say that you earned $7,500 working at your part-time job in 2018. In addition to your employment income, you received $2,500 in Employment Insurance benefits as a result of being laid off. In this scenario, any deduction that you’re entitled to claim for child care expenses will only be based on your employment income ($7,500).
Where do I claim this?
Follow these steps in H&R Block’s 2018 tax software:
Before you begin, make sure that you’ve told us about your dependants for whom you’ll be claiming child care expenses.
- On the left-hand navigation panel, click the name of your dependant. You'll find yourself here:
- Under the EXPENSES heading, select the checkbox labelled Child care expenses (T778), then click Continue.
- When you arrive at the page for form T778, enter your information into the tax software.