Tax Savings Regarding Dependent Children

With fall now in full swing, parents are realizing that summer has ended and their kids have returned to their normal routines of school days and extra curricular activities. That being said, parents may potentially be missing out on some important tax savings related to those bundles of joy.

Child Care:

A household may claim up to $8,000 per annum of child care expenses per child under the age of 7 at the end of the year and $5,000 per annum per child aged 7 through 16 at the end of the year.  Higher amounts may be claimed with respect to a child who qualifies for the Disability Tax Credit.

Babysitting, nanny salaries, boarding schools, daycare centers, caregivers and day camps may all qualify as eligible expenses, if the necessary criteria have been met. The expenses must be incurred in order for the parents to earn income from employment, carry on a business, attend school or carry on research similar to work. Keeping valid receipts evidencing the amounts paid, with the social insurance number or business number and Quebec Identification Number of the individual or business providing the child care services is essential.  On the Quebec side, you may even be entitled to receive an advance on the child care tax credit: https://www.revenuquebec.ca/en/citizens/tax-credits/tax-credit-for-childcare-expenses/advance-payments/

While extra curricular and after school activities were formerly claimable under the fitness and arts tax credit, the liberal government eliminated these credits for 2017 and later years.  However, a portion of the amounts paid for these activities may be eligible child care expenses, if the necessary criteria are met.

Tutoring and school expenses:

Tutoring expenses were also previously claimable for children under the arts tax credit. These expenses may, however, constitute eligible medical expenses if the parent has obtained a prescription by a medical practitioner specifically stating that tutoring is necessary for the child.

In summary, many expenses paid for a dependent child may give rise to potential tax benefits in the form of medical expense tax credits, tuition credits, child care expenses, and others, but valid documentation must be obtained if they are to be accepted by the taxation authorities.

For additional information, please contact your Crowe BGK advisor.

About the author:

Aaron Patrick Belcher CPA, CGA, is a Tax Specialist at Crowe BGK

Connect with him: [email protected]