If you pay for daycare, a nanny, or after-school care so you or your spouse can work or study, the Canada Revenue Agency lets you deduct those costs directly from your income — not just as a small credit, but as a full deduction that reduces the income you are taxed on. Understanding how this deduction works, who can claim it, and what the 2025 limits are can make a meaningful difference on your tax return.
This is one of the most commonly misunderstood points. The Child Care Expense Deduction is claimed on Line 21400 of your T1 return, and it reduces your net income rather than providing a tax credit against the tax you owe. A deduction from income is generally more valuable than a non-refundable credit because it lowers the base on which your tax is calculated — including affecting income-tested benefits like the Canada Child Benefit.
The deduction is governed by Section 63 of the Income Tax Act, and while the rules are fairly detailed, the core principle is straightforward: if you paid someone to look after your child so that you could earn employment income, run a business, or attend school, those payments are deductible up to the annual limits set by CRA.
The general rule is that the lower-earning spouse or common-law partner must claim the Child Care Expense Deduction. This is not optional — CRA requires it. The logic is that the deduction is meant to offset the income-earning activity of the family unit, and the lower earner's marginal rate governs how much tax relief you receive.
However, the higher-earning spouse can claim the deduction in specific circumstances:
If the lower-earning spouse is in school, the amount the higher earner can claim is calculated on a per-week basis for the weeks the lower earner is enrolled, so keeping a record of school schedules matters.
The annual dollar limits for the Child Care Expense Deduction in 2025 are as follows:
These are per-child maximums. A family with a two-year-old and a ten-year-old could potentially claim up to $13,000 in total, subject to the income limit described below.
In addition to the per-child dollar limits, there is an overall ceiling: the total deduction cannot exceed two-thirds of the lower-earning spouse's net income. This cap often comes into play when one parent earns relatively little during the year — for example, if they were on parental leave for most of it. You calculate two-thirds of that spouse's net income and compare it to the sum of the per-child limits; whichever is lower is your maximum deduction.
CRA's definition of eligible child care is reasonably broad and covers the most common arrangements families use:
Fees paid to a licensed daycare centre or a registered home daycare are fully eligible up to the annual per-child limits. The daycare centre will typically provide a receipt or year-end summary with their business number — keep this for your records.
After-school care programs and nursery school fees (distinct from kindergarten tuition — more on that below) qualify as child care expenses. The purpose of the program matters: it must exist to provide supervision and care so that a parent can work or study, not primarily for educational instruction.
Payments to a babysitter or nanny — whether they work in your home or theirs — are deductible. The key requirement here is that if you are paying an individual rather than a business, you must obtain and record their Social Insurance Number (SIN). CRA cross-references this information, so claiming payments to an individual without their SIN will almost certainly result in the deduction being denied on audit.
Day camps (including sports day camps and specialty day programs) qualify for the full per-child limit of $8,000 or $5,000 depending on age. The distinguishing feature between a day camp and an overnight camp is that the child returns home each night.
Overnight camps are eligible but subject to a much lower weekly cap:
This weekly cap replaces the annual per-child limit for any weeks the child is at an overnight camp, so the benefit for overnight camps is substantially less than for day camps or regular daycare.
Several common expenses families assume are deductible under child care are actually excluded:
Kindergarten fees are specifically carved out of the Child Care Expense Deduction. The tuition portion may be eligible for the Tuition Tax Credit depending on circumstances, but it cannot be claimed as a child care expense on Line 21400. Similarly, private school tuition at the primary or secondary level does not qualify — even if one motivation for the private school is the extended-care environment it provides.
Registration fees for hockey leagues, dance classes, gymnastics, or similar recreational activities do not qualify, even if they occupy the child for several hours each week. CRA distinguishes between care (which is deductible) and instruction or recreation (which is not). A hockey camp where children skate and receive instruction would be recreational; a day camp that happens to include sports activities would generally qualify.
You do not attach receipts to your T1 return when you file — CRA does not require submission of documentation upfront. However, you must retain receipts and records in case CRA requests them on audit, and child care claims are among the more commonly reviewed deductions.
For each payment, your documentation should show:
For nannies and babysitters, it is worth asking at the start of the arrangement for their SIN — trying to collect it later can be awkward, and without it your deduction is at risk.
When parents are separated or divorced, the deduction generally belongs to the parent who paid the child care expenses and with whom the child primarily resided during the year. If the child split time equally between two households and both parents paid care costs, each parent may claim their own payments for the periods the child lived with them, subject to the usual income and per-child limits.
Separation agreements sometimes address child care costs explicitly — if one parent reimburses the other, only the parent who made the actual payment to the care provider can claim the deduction.
Because the deduction reduces net income, maximising it can have a ripple effect across your return — higher Canada Child Benefit payments, reduced clawbacks on other income-tested amounts, and lower provincial taxes in Alberta. The interplay between the lower-earner rule, the two-thirds cap, and exceptions for school enrolment can make the optimal filing strategy less obvious than it first appears.
At Swift Accounting Calgary, we review child care claims as part of every personal tax engagement to make sure families are capturing the full deduction they are entitled to — including cases where the higher earner qualifies to claim due to the lower earner's school attendance or other circumstances. Small details in how the deduction is structured can shift the tax outcome by hundreds of dollars.
If you would like a second look at your family's child care expenses or have questions about what qualifies, contact Swift Accounting and we will walk through your situation in plain language.
Yes, provided you meet the general eligibility requirements — you must be earning employment or business income (or attending school) and the care must be provided so you can do that. Working from home does not disqualify you; CRA's position is that care for children in the home while you work is an eligible expense as long as the payment is to a third party (not to the other parent who lives with you).
CRA looks at your child's age as of December 31 of the tax year. If your child turned 7 at any point during 2025, the $5,000 limit applies for the entire year, even for months when they were still 6. The under-7 limit of $8,000 applies only if the child was 6 or younger on December 31, 2025.
Yes, payments to a relative are eligible, with one exception: you cannot claim payments made to the child's other parent, or to anyone under 18 who is related to the child (such as an older sibling). Payments to an aunt, adult cousin, or grandparent are generally fine, provided you have their SIN and proper receipts. The same documentation rules apply as with any individual provider.
CRA can request documentation at any time within the normal reassessment window, typically three years from the date of your original assessment. Retain all receipts, e-transfers, or other payment records, along with any written agreement or confirmation from the care provider. If your provider is an individual who has since moved or changed numbers, this can become difficult to reconstruct — which is why collecting documentation at the time of payment is strongly recommended.
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