What do Day-Camp, Babysitting, Preschool, Summer Camp, Nannies and Boarding School have in common?

Childcare Expenses are Deducted Dollar for Dollar
from your income saving more tax than other expenses.

Besides providing wildly entertaining activities designed to amuse your kids... and give you a moments peace... all of these are types of Childcare that could be valuable Tax Deductions you aren't fully taking advantage of.

Childcare Expenses are deducted off your earned income dollar for dollar for tax purposes, so essentially that income is cancelled out. That is why it's more valuable to you than other types of Tax Credits like Bus Passes or Medical Expenses.

While most people are aware that they can claim Licensed Daycare or After School Care when it comes to some of the other eligible Childcare Expenses it can get confusing. But the rule of thumb is if the activity you have enrolled your child in is allowing you or your partner to go to school or do an income earning activity, in general, it can be claimed. The expenses are eligible where the primary goal is childcare for earning income but if the expenses don't line up with your specific work hours that doesn't mean they aren't eligible... they still allow you to keep your sanity after all. The total expenses for the year are claimed against your annual income, not on a day by day or month by month basis. It is accepted that you may not always be "at work" while your child is in paid care, but being free to do other activities during that time may allow you to work "overall" so CRA doesn't get involved in those personal choices so as long as your are earning eligible income to deduct it from, that is sufficient.

Under CRA's rules, if you are married or common-law, childcare must be claimed by the person who has the lower net income. Except if that person was incarcerated, incapacitated by illness, or in school. If those situations apply then the higher income person can claim those weeks which usually results in a bigger deduction. See form T778.

Eligible Expenses (up to annual combined limit of $4000-$7000 for each child based on age/disability). The age limit for the child being eligible is 16 unless the dependant is disabled.This cannot be money paid to a blood-relative under 18 or a spouse.

• Daycare of After School Care costs, Licensed or not. Individuals must provide their name and SIN if they are not a Daycare Center. If the daycare is a business, no SIN is needed.
• Babysitting costs. You need the individuals name and SIN number (note sometimes people are hesitant to declare the income but for teenagers with no other job, this is unlikely to be enough income to be taxable and exceed their personal exemptions). 
• Nannies. The cost of their Salary, plus taxable benefits and expenses such as CPP/EI.
• Preschool fees, including mandatory registration costs. 
• Summer Camps/Overnight Camps/Overnight Sports Schools. Subject to a weekly limit based on age of $100-$250.
• Day Camps/Day Sports Schools: The most frequently misunderstood and neglected expenses. This is treated as normal daycare, even if its a super fun activity centered camp like golf, laser tag, dancing, sports, etc. If its more than 5 days long, see below.
• Educational Institution Fees, for the part that relates to childcare and not education if you can be provided a receipt that details supervision costs during recess and lunch, etc.
• Advertisement and Placement Agency Fees may also qualify if needed in order to find a suitable childcare provider or nanny for your situation.

A few common pitfalls and tips for Day-Camps and other Childcare:

• If you have no eligible income to use Childcare against (EI or Social Assistance for example) it cannot be carried forward and may be wasted, but consider if it is also eligible for the Fitness or Arts Credits instead or if your situation allows the higher income spouse to claim it instead.
• If the lower income person is non-taxable but has income, it can reduce their income to qualify for more child tax benefit or increase spousal credits for their spouse.
• 5 day camps are also allowed to be claimed as a Fitness or Arts expense when it would be more valuable to claim it as Childcare and not be subject to the respective $500 limits per child for those Tax Credits. Sometimes the issuer will "helpfully" stamp it as being an eligible fitness credit, but won't mention it may be more beneficial to claim it as childcare.
• Claiming Day Camps as "Camps". Sleep away/Summer camps and Boarding School costs are limited to a weekly Maximum in order to exclude all the other components that aren't eligible, but Day Camps are not. This is a most common error when using software where people enter the expense as a Camp instead of Daycare, which adds the limitation. This limitation does not apply to Day Camp activities you enroll your children in and should be claimed in FULL.
• If you have reached your maximum for Childcare, consider 5 day camps as Fitness Expenses instead of allowing them to be wasted, for example if you have a nanny as well.
• If you have reached your childcare limit on other expenses and have your child in preschool, consider using the preschool expense as the Arts Credit instead rather than wasting it.
• If you have a child with a disability, and do not have other Arts and Fitness Credits over $100 each but also have a 5 day camp that could also qualify, use one worth at least $100 to receive the "bonus" supplemental $500 increase to your expense for fitness or arts to $600 or more. This is the one exception where it can be more than valuable than Childcare if you have income.

Pain Free Tax is a BBB A+ Company that offers free reviews of your tax returns to see if you might be eligible for adjustments to anything you may have missed on your last 10 tax returns. Contact us at service@painfreetaxes.ca for help. We offer mobile service and helpful advice.

$4638 Recaptured by Claiming Selling Costs of House

We recently helped a couple who moved from Nanaimo to Victoria in 2011 and rented the house out. In 2013 they sold the home after waiting for market conditions to improve a bit.

We advised these clients they should be claiming the selling costs as a Moving Expense and the adjustment request we submitted for them resulted in a reassessment and saved them $4638 of tax they otherwise would not have received.

Often moving expenses are not all incurred in the same year, and some of the costs eligible to be claimed are not as obvious as others, such as Realty Commissions, Legal Fees, and Land Transfer Tax. If they cannot be applied in the year that you moved, as there was no income earned in the new location yet (or you haven't found the job yet), then you can apply them in a future year.

The expenses must be reported on the tax return in the year they are incurred. So in this case there were expenses in 2011 and 2013 from the same move.

Keep in mind if you move again and haven't claimed them in the location of where you moved, they will be cancelled at that point.

Single Parents with Children Under 6 - The UCCB can be claimed on your child

One of the most frequently overlooked tax savings available to a Single Parent for the past few years is the ability to claim the UCCB Benefit ($100 per month for each child under 6) as the income of an eligible child rather than including it in their own income.

If the parent is claiming an Amount for an Eligible Dependant (claiming the Child for additional credits instead of a spouse), the UCCB income has to be used for that specific child and their credit reduced by the income.

If the parent is not claiming the Amount for Eligible Dependant, the income can be claimed as the income of the child for whom you are receiving the benefit instead.

The child does NOT need to a file a tax return to take advantage of this option.

Either way, taking advantage of this reduces the taxable income of the parent and in most cases results in some tax savings even if the Amount for Eligible Dependant is reduced. In some provinces it makes more difference than others because of the provincial tax calculations.

For example, with a single parent in BC with a taxable income of $60,000 it can mean a savings of an approximately $180.

To do this, instead of reporting the UCCB on line 117 of your tax return, report it on line 185.If you haven't been taking advantage of this, it's not too late. You can go back and adjust your tax returns for the last 10 years using form T1 Adj.

Feel free to contact us at service@painfreetaxes.ca or 1-844-EZ-TAXES for a free consultation about this or other potential missed credits.