The work-from-home arrangements which were ubiquitous throughout the pandemic and, to a lesser degree, for a couple of years afterwards, are now largely a thing of the past for most Canadians. One of the consequences of the return to the office was the need for parents who work outside the home to arrange for (and pay for) child care – sometimes for the after-school period and sometimes for the entire day.
While arranging child care for just a few hours a day can work for many families during the school year, the need to organize all-day child care for the summer months becomes top of mind for most parents as the school year draws to a close. Parents needing to arrange such care don’t lack for options, as a quick search of online listings and advertisements in local media will produce an almost limitless number of choices. What each of those choices has in common, however, is a price tag – sometimes a steep one. Some options, like playground supervisors or day camps provided by the local recreation authority or municipality, can be relatively inexpensive, while the cost of others, like residential camps that provide room, board, and a range of sports and arts activities, can run to thousands of dollars per week.
The good news for families which incur such expenditures is that in many cases a deduction for part or all of the costs incurred can be claimed on the tax return for the year. And, since eligible expenditures can be deducted from income on a dollar-for-dollar basis, that means that income used to pay eligible child care expenses is income which is not taxed. That tax savings is obtained by claiming the Child Care Expense Deduction, which is not specific to summer child care or summer camp costs, but is available for qualifying child care expenses incurred at any time during the year. As well, the rule determining whether child care costs incurred are deductible is fairly straightforward – parents who incur eligible child care costs in order to work (whether in employment or self-employment), or in some cases to attend school, can deduct those costs from income, within specified limits.
The amount of any available child care deduction is calculated on Form T778 E, and that calculation can seem forbiddingly complex. However, at the end of the day, the amount of child care expenses which can be deducted is simply the least of three figures, and only one of those figures requires a calculation. The steps involved in determining the amount of available child care expense deduction are as follows.
First, the amount of any deduction for child care expenses is limited to two-thirds of the taxpayer’s net income for the year. The income figure used to calculate the two-thirds figure is, generally, the amount shown on Line 23600 of the annual tax return. Where the family incurring child care expenses is a two-income family, it is the spouse with the lower net income who must make the claim and consequently it is their net income which is used to provide that two-thirds of net income figure.
The second figure to be determined is the amount actually paid for eligible child care costs during the year. While virtually any licenced child care arrangement will qualify for purposes of the deduction, some more informal arrangements may not. Specifically, no deduction is available for amounts paid to most family members to provide child care. Consequently, it’s not possible for a working spouse to pay the stay-at-home parent to provide child care, nor is it possible to pay an older sibling who is under the age of 18 to provide such services and to claim a deduction for those expenses incurred. As well, where a claim is made for a deduction for child care expenses on the annual return, the claimant must obtain (and be prepared to provide to the tax authorities) the social insurance number of the individual providing the care as well as a receipt showing the amounts paid, whether to an individual or an organization.
The third figure to be determined is the one which requires some calculation. Basically, the rules governing the deduction of child care expenses impose a maximum deduction per child per year (referred to as the “basic limit”), with that basic limit dependent on the age and health of the particular child. As well, where expenses are incurred for overnight camps or overnight sports schools, the amount deductible for such costs is similarly capped.
For 2025, the following overall limits apply:
- $5,000 in costs per year for a child who was born in 2009 to 2018;
- $8,000 in costs per year for a child who was born after 2018;
- $11,000 in costs per year for a child who was born in 2025 or earlier and for whom the disability tax credit can be claimed.
The limits which are placed on the amount of costs which can be deducted for overnight camp or overnight sports schools fees are as follows:
- $125 per week for a child who was born in 2009 to 2018;
- $200 per week for a child who was born after 2018; and
- $275 per week for a child who was born in 2025 or earlier and for whom the disability amount can be claimed.
Taking all of these figures into account, the computation of a deduction for summer day camp expenses for a typical Canadian family would look like this.
A two-income family has two children and both parents work outside the home. One spouse earns $72,000 per year, while the other earns $57,000. In 2025, one child is age 9 and the other is age 5. Neither child is disabled. During July and August, both of the children attend a local full-day summer camp, for which the cost is $500 per week per child.
- The first step is to determine the two-thirds of income figure. Since it is the lower-income spouse who must make the deduction claim, that figure is two-thirds of $57,000, or $37,996. Consequently, any deduction for child care expenses for the year cannot exceed $37,996.
- The second calculation is the total amount of child care expenses paid for each child:
$500 per week for eight weeks of summer camp, or $4,000.
Total child care expenses for each child are therefore $4,000. - The last step is to determine the basic limit for child care expenses for each child, as follows:
- the basic limit for the 5-year-old (who was born after 2018) is $8,000, and so the entire $4,000 in summer day camp costs incurred can be deducted.
- the basic limit for the 9-year-old (who was born between 2009 and 2018) is $5,000, and so once again the entire $4,000 incurred for summer day camp costs can be deducted.
As well, since the camp is a day camp, the dollar amount cost limitations which apply with respect to overnight camps does not apply to limit the amount of expenses claimed by the family.
The total deduction available for child care expenses incurred for the 2025 tax year will therefore be $8,000. That deduction is claimed on Line 21400 of the tax return filed by the lower-income spouse for the year, reducing their taxable income from $57,000 to $49,000, and resulting in a federal tax savings of $1,160. A similar tax deduction is claimed as well for provincial tax purposes; the amount of provincial tax saved will depend on the tax rates imposed by the province in which the family lives.
When parents are choosing summer activities/care for their children, that decision involves a number of factors, including the child’s interests and abilities, the availability of programs which match those interests and abilities, the work schedules of one or both parents, and, of course, the cost of the program or activity. While the availability of a “subsidy” through the tax system should never be the sole determinant of what activity or camp is the best choice, there’s no denying that being able to claim a deduction for the costs involved can tip the balance toward one or choice or another, or can bring a formerly unavailable option within a family’s financial reach.
Parents wishing to find out more about the child care expense deduction, and perhaps to calculate the maximum deduction which will be available to them for the 2025 tax year, should consult Form T778 E (23). The form, which is currently on the CRA website at https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t778.html, is from the 2024 tax year, and consequently the age limits must be adjusted by one year for child care expense claims for 2025. (The actual form for 2025 will be posted on the CRA website early in 2026.) The currently available form does, however, provide a detailed explanation of the rules governing the child care expense deduction, and those rules (as well as the applicable dollar limits, which are not indexed to inflation and have not changed since 2014) will likely continue to apply for the 2025 tax year.
The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.
