Child care is one of the largest household expenses for Canadian families with young children. The good news is that the Canada Revenue Agency allows you to deduct many of these costs from your income, reducing the tax you owe. Understanding the child care expenses deduction — what qualifies, how much you can claim, and who must file it — can mean thousands of dollars back in your pocket each year. Here is a plain-language guide to the 2025 rules.
The child care expenses deduction exists to offset costs you incur so that you (or your spouse or common-law partner) can earn employment income, run a business, carry on eligible research, or attend school. The expense must be for the care of an eligible child, which generally means a child under age 16 at some point during the year, or a child of any age who is dependent on you due to a mental or physical infirmity.
The following types of payments are eligible:
One common misconception worth clearing up: overnight camps do not qualify. Whether it is a summer sports camp or a wilderness program, if the child sleeps there, those fees are excluded from the deduction. Day camps are fine; overnight camps are not.
The CRA sets per-child annual limits that cap how much you can deduct regardless of actual spending. For the 2025 tax year, the limits per eligible child are:
In addition to the per-child caps, your total deduction cannot exceed two-thirds of the claimant's earned income for the year. Earned income for this purpose includes employment income, self-employment income, and research grants, but not investment income or government transfers.
A practical example: Suppose the lower-income spouse earned $12,000 in 2025 and you have one child who was four years old at year-end. Two-thirds of $12,000 is $8,000. The per-child cap is also $8,000. Both limits land at the same figure, so the maximum deduction is $8,000 — assuming at least that much was actually paid. If the lower-income spouse had earned only $9,000, two-thirds would be $6,000, and that lower figure would cap the claim even though the per-child limit is higher.
This is where many families are caught off guard. Canadian tax law requires that child care expenses be claimed by the lower-income spouse, not the higher earner. It does not matter who physically made the payments or whose credit card was charged. The deduction belongs on the return of the spouse with the lower net income for the year.
The reasoning behind this rule is that the deduction is meant to recognise that the lower-income spouse needs child care to participate in the workforce. From the CRA's perspective, the child care is enabling the lower-income spouse's employment, so that is the return where it is applied.
This design reduces the overall tax benefit for higher-income households. Because the lower-income spouse is likely in a lower marginal tax bracket, each dollar of deduction saves less tax than it would on the higher earner's return. It is not the most generous structure for dual-income households, but it is the law, and planning around it starts with understanding it clearly.
There are four situations where the higher-income spouse is permitted — and in some cases required — to claim the child care deduction instead:
These exceptions exist to reflect real-life circumstances where applying the standard rule would produce an unreasonable result.
To claim the child care expenses deduction, you must complete Form T778 — Child Care Expenses Deduction. The form walks you through the calculation step by step. You will list each child care provider, the amounts paid to each during the year, and the provider's Social Insurance Number or business number.
Once the form is completed, the total deduction flows to line 21400 of your T1 personal income tax return. This line reduces your net income, which in turn can also reduce income-tested benefits such as the Canada Child Benefit and Old Age Security clawbacks. It is a true net income deduction, not merely a tax credit, which makes it more valuable on a dollar-for-dollar basis than a non-refundable credit.
Attach Form T778 to your paper return, or ensure your tax software has populated it if you file electronically. Keep your receipts and records for at least six years in case the CRA requests them during a review.
One firm requirement is that you must provide the Social Insurance Number of every individual provider, or the business number of every institutional provider, on Form T778. There are no exceptions to this rule.
If you pay a nanny or babysitter cash and they refuse to give you their SIN, you simply cannot claim the deduction. The CRA uses this information to cross-reference that the provider is reporting the income on their own return. An informal, off-the-books arrangement offers no tax benefit to you and may create payroll obligations if you are employing a nanny directly.
For non-resident providers who care for your children in Canada, the same principle applies — you must obtain their individual tax identification number before you can include their payments in your claim. If you are unsure whether your arrangement qualifies or how to handle the documentation, the team at Swift Accounting in Calgary can help you work through the specifics before you file.
Keep receipts for every payment made to a child care provider throughout the year. For employed nannies, retain copies of pay stubs, T4 slips you issued, and Canada Pension Plan and Employment Insurance remittance records if applicable. For daycare centres, request an annual fee statement. Good records make filing straightforward and protect you in the event of a CRA review.
The child care expenses deduction can save your family a meaningful amount each year, but the lower-income spouse rule, the two-thirds earned income limit, and the SIN requirement all create opportunities to get the claim wrong. Whether you are navigating a dual-income household, a separation, or a nanny arrangement for the first time, Swift Accounting Calgary is here to help you claim every dollar you are entitled to.
Contact us today to speak with one of our accountants about your family's tax situation. We serve Calgary families year-round, not just during tax season.
Generally, no. The deduction is available only when the child care expenses were incurred to enable a spouse to earn income, attend school, or conduct research. If one spouse was at home all year with no employment, self-employment, or educational activity, the CRA considers child care unnecessary for income-earning purposes and the deduction is not available. There are limited exceptions — for example, if the stay-at-home spouse had a physical or mental infirmity — but the standard rule requires both spouses to have earned income or qualifying activity during the year.
The age limit is assessed at December 31 of the tax year. If your child was still six years old on December 31, 2025, the $8,000 limit applies for 2025, even if they turn seven just weeks later. If they turned seven on or before December 31, 2025, the $5,000 limit applies. Timing a year-end birthday has no practical effect on which limit you use — only the age on the last day of the year matters.
It depends. The babysitter must be at arm's length from you, which a neighbour typically is. However, you must have the babysitter's SIN to claim the deduction, and the babysitter must report the income on their own tax return. If the teenager is a minor and is your own child, payments are not deductible. If they are someone else's child aged 16 or over, the payments can qualify provided you have their SIN and the other conditions are met. Amounts paid to babysitters who are your own minor children are specifically excluded.
Day camps qualify for the child care expenses deduction even if they have a recreational or instructional component. The CRA's position is that day camps — including sports day camps — are eligible because the child is supervised during the day, enabling the parents to work. Overnight hockey camps or residential sports programs, however, do not qualify at all. If your camp ran during the day and your children came home each evening, the fees should be eligible subject to the per-child annual limits and the two-thirds earned income rule.
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