Child care expenses are generally considered personal or living expenses. However, some expenses may be tax deductible if they were incurred to allow you or your spouse to earn income from employment or self-employment, to go to school, or to conduct research.
The expenses must be incurred on behalf on an eligible child. And the government has specific rules regarding what types of expenses are deductible.
Which spouse should claim child care expenses?
In typical situation, where the child lives with both parents, the child care expense deduction has to be claimed by the lower-income parent. But in some situations, the deduction can be claimed by the higher-income spouse.
Child care expenses can be deductible only against earned income.
Child care expenses can be expensive. You may not able to claim all expenses you paid. The government places limits on the maximum child care expenses that can be claimed per eligible child. There are further restrictions if the higher income spouse claims the deduction or if the expenses are paid to boarding schools or camps.
What amount can you deduct?
The deductible amount is the least of:
- The actual amount paid
- Two thirds of earned income of the parent who claims the deduction
- The deduction limit