This tax season, challenge your knowledge on personal tax

Tax Quiz #3: Family childcare expenses

This tax season, challenging your knowledge on personal tax might be enlightening. Here is another in a series of typical tax planning and preparation situations to test you.

You and your spouse both work, you make $50,000 and your spouse makes $20,000. You have a three-year-old child and childcare costs are $1,000 per month so $12,000 annually. Can you deduct the childcare cost as the higher income earner?

No you can’t. But your spouse can.

The lower income earner is allowed to make the claim, but only to a maximum of $8,000 as per Canada Revenue Agency (CRA) rules.

Noteworthy, if the child were 7 to 15 years of age, the maximum claim for that child would be $5,000. A disabled child qualifies for an $11,000 claim, regardless of age.

Having said this, there is a maximum claim threshold defined by two-thirds of the lower income earner’s income, so in this case the maximum allowable claim would be $13,333, therefore the $8,000 maximum would still apply.

Variation on the above scenario. Let’s add a second child to the family who is 14 years of age and doesn’t require any childcare. The rest of the family situation is as described before. What is the maximum allowable childcare expense claim?

As before, any claim must be applied to the lower income earner. However, the maximum claim for the household is now the younger child’s $8,000 plus the older child’s $5,000 for a total of $13,000 maximum.

Given the $13,000 maximum, the full $12,000 childcare expense can be claimed even though there is no childcare expense directly associated with the 14 year old child.

In other words, the calculation of the total childcare expense claim includes the addition of all allowable maximums for all children aged 15 and under. Of course the maximum allowable claim amount is subject to the two thirds lower income earner rule.

Okay, a third scenario. Only one parent works in the house. What is the maximum allowable childcare expense claim?

If you said zero, you are correct. Both parents must be working to make a childcare expense claim.

Or, do they really both have to be working? Here’s scenario four, one parent is working and the other is enrolled in school. Or both parents are in school.

The childcare expense claim can be made with parents in school, but only if the parent or parents are enrolled in full-time studies. Part-time enrollment disqualifies a childcare expense claim.

Scenario five. In the case of a single parent who is working or is a full-time student, the childcare expense is allowable to the maximum described previously.

And the final scenario. A parent earning income with a home based business. This does meet the definition of a working parent so the childcare expense claim will qualify subject to the CRA rules previously described.

Ron Clarke has his MBA and is a business owner in Trail, providing accounting and tax services. Email him at ron.clarke@JBSbiz.ca. To read previous Tax Tips & Pits columns visit www.JBSbiz.net.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Police apprehend Trail woman suspected of attempted armed robbery

The incident happened Wednesday night shortly before 10 p.m. in downtown Trail

Trail RCMP report on vandalism, an OD and theft

The first week of April was a busy one for the Trail and Greater District police

Opinion: Canadian emergency relief comes up short

MP Richard Cannings is serving his second term representing the South Okanagan-West Kootenay riding

BC Housing enlists Nelson hotels, Kalein Centre for COVID-19 isolation spaces

The service is for people either at-risk of or currently homeless

COVID-19 death toll reaches 50 in B.C., while daily case count steadies

B.C. records 34 new cases in the province, bringing total active confirmed cases to 462

B.C. unveils $5M for mental health supports during the COVID-19 pandemic

Will include virtual clinics and resources for British Columbians, including front-line workers

B.C.’s COVID-19 rent supplement starts taking applications

$300 to $500 to landlords for April, May and June if eligible

Reality TV show about bodybuilders still filming in Okanagan, amid COVID-19

Five bodybuilders from across the country flew to Kelowna to move into a house for a reality TV show

B.C.’s top doctor details prescription for safe long weekend

Yes, it includes hosting an online cooking show

BC SPCA seeks help for abandoned German shepherd puppies

Donations have ‘petered out’ as doors are closed due to COVID-19

Researchers to study whether plasma of recovered patients can treat COVID-19

Plasma is the liquid portion of the blood that contains the antibodies that protect against illness

Schools re-open in Nelson and Creston, but only for children of front-line workers

School District 8 is providing on-site education for certain families during the pandemic

Most Read