T778 Child care Expenses

Tax Topics
1

Who is eligible to claim Child care Expenses?

1- Spouse with the higher earned income ?

or

2- Spouse with the lower earned income (lower income spouse has also claimed disability credits)?

2

normally it’s the lower income spouse who claims the credit however the higher income spouse can claim if the lower income spouse is either of the following:

  1. a student in attendance at a [designated educational institution],
  2. certified in writing by a medical doctor, or a nurse practitioner (in respect of certifications made after September 7, 2017), to be a person who:
  • by reason of mental or physical infirmity and confinement throughout a period of not less than two weeks in the year to a bed or to a wheelchair or as a patient in a hospital, an asylum or other similar institution, was incapable of caring for children, or
  • by reason of mental or physical infirmity, was in the year, and is likely to be for a long-continued period of indefinite duration, incapable of caring for children; or
  1. confined to a prison or similar institution throughout a period of not less than two weeks in the year.
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3

The spouse with the lower income MUST report the child care expenses first, and they are only eligible to claim if there was employment income earned. If your clients higher earning spouse has an active corporation (assuming a going concern), you can throw a management fee over to the lower income spouse on their T2125 and claim corresponding child care from thereon (just a little trick!).