Child-care costs vary depending on the child’s age and where you live, but it’s not uncommon for these costs to be upwards of $6,000 per year.
One consolation for that particular expense is that it’s tax deductible. Parents can claim up to $7,000 for every child under the age of seven, $4,000 for every child age seven to 16, and up to $10,000 for a child who qualifies for the disability tax credit.
"Keep track of your child-care expenses in order to maximize the amount you can claim," says Christine Van Cauwenberghe, tax and financial planning expert with Investors Group. She says many parents make the mistake of not claiming the maximum amount of eligible expenses.
That would be an opportunity lost, as child-care amounts cannot be carried forward to future years.
Parents are advised to report each child 16 and under on their tax return, whether or not they incurred any expenses for that child. That way they can claim the cumulative amount for the children.
For example, suppose you have a child under age seven, and you’ve spent $9,000 on child care, or $2,000 above the limit.
You have another child age 10, and you’ve only spent $1,000 for after-school care. Because you are still under the cumulative total of $11,000, you can claim the entire amount.
Eligible expenses include day care and before-school/after-school care. There are also amounts that can be claimed for summer day camps and sports camps that have a child-care element.
For these types of summer child care programs parents are entitled to claim up to $175 for children aged six and under, $100 for children aged 7 to 16 and $250 for children with a disability.
"A week at an elite hockey school for a 15-year-old, geared towards improving his skills, would not be seen as child care, although it may qualify for the fitness tax credit."
Child care expenses have to be claimed by the lower income-earning spouse, and you can only claim up to two-thirds of your income.
If the child is in private school, and there is a before/after school care component, ask the school to itemize the bill to indicate what portion is for child care.
While tuition for the private school is not deductible, expenses related to child care can be deducted.
Parents can also claim the children’s fitness amount.
The non-refundable credit is worth up to $500 for children under the age of 16 enrolled in an eligible program of physical activity. Not every program meets the eligibility guidelines, so you need to ensure you know the requirements. Children with disabilities are eligible for a $1,000 credit up to the age of 18.
Single parents are also able to claim the Eligible Dependent Credit. This tax credit can also be claimed for a dependent grandchild, sibling, parent or grandparent.
If it’s being claimed for a child, grandchild or sibling, the dependent must be either under 18 years of age, or dependent by reason of mental or physical disability. Only one parent can claim this credit, and it can’t be claimed if you are making child support payments.
"Remember that child-care expenses have to be claimed in the year in which they are incurred," Van Cauwenberghe adds.
"Save all of your receipts, and maximize the amount you can claim."