Yes, daycare is tax deductible in Ontario. You claim child care expenses federally on Line 21400 of your T1 return, which reduces your taxable income, and if your family income is under $150,000 you can also claim Ontario’s refundable Childcare Access and Relief from Expenses (CARE) tax credit on top. Together they return a meaningful share of what you spend each year.
How Much You Can Deduct Per Child
The federal deduction is capped per child based on age at the end of the year:
- Under 7: up to $8,000
- Aged 7 to 15: up to $5,000
- 16 or older with an infirmity who is not eligible for the disability tax credit: up to $5,000
- Any age, eligible for the disability tax credit: up to $11,000
These limits have been in place since 2015 and have not been indexed since.1Canada Revenue Agency. Income Tax Folio S1-F3-C1, Child Care Expense Deduction
The Two-Thirds Earned Income Cap
Even if your actual bills reach the per-child ceiling, your deduction cannot exceed two-thirds of your earned income for the year. Earned income means wages, self-employment income, CPP or QPP disability pension payments, taxable scholarships and research grants, apprenticeship grants, and certain government financial assistance. Investment and rental income do not count.1Canada Revenue Agency. Income Tax Folio S1-F3-C1, Child Care Expense Deduction
Your deduction is the lower of the combined per-child limits or two-thirds of earned income. So if you paid $16,000 in daycare for two children under seven but earned $20,000 from employment, the most you can deduct is $13,333, not $16,000. This cap often matters more than the per-child ceiling, especially for parents who returned to work partway through the year.
Who in the Family Claims It
If you have a spouse or common-law partner, the lower-income partner generally must make the claim. This is built into section 63 of the Income Tax Act and isn’t a strategic choice.2Department of Justice Canada. Income Tax Act – Section 63 Single parents simply claim it themselves, subject to the same limits.
The higher-earning spouse can claim only during periods when the lower earner was a student in a qualifying program, confined to a bed, wheelchair, hospital or similar institution for at least two weeks due to a physical or mental condition, unable to care for children due to a long-term infirmity, incarcerated for at least two weeks, or living separately due to relationship breakdown for at least 90 days (with reconciliation inside the first 60 days of the following year).3Canada Revenue Agency. Line 21400 – Child Care Expenses – Determine Who Can Claim the Deduction In those cases, the deduction is limited on a weekly or monthly basis matching the period the exception applied, not the full annual ceiling.2Department of Justice Canada. Income Tax Act – Section 63
What Daycare Costs Qualify
The CRA accepts a broader range of payments than most parents expect:4Canada Revenue Agency. Line 21400 – Child Care Expenses – Expenses You Can Claim
- Licensed daycare centres and day nursery schools
- Nannies, babysitters, and other individual caregivers
- Day camps and day sports schools, if the main purpose is caring for the child rather than specialized instruction
- Educational institutions, but only the portion of fees that covers child care rather than tuition
- The employer’s share of CPP contributions and EI premiums you paid for an in-home caregiver
What doesn’t qualify: medical or hospital care, clothing, transportation, regular school tuition, and purely recreational activities such as tennis lessons or Scouts registration. You also can’t claim any expense you were reimbursed for.4Canada Revenue Agency. Line 21400 – Child Care Expenses – Expenses You Can Claim
For day camps and sports programs, the line is purpose. A camp that supervises your child while you work qualifies. A program that exists to teach a skill, with supervision as a side effect, does not.
Paying a Relative to Babysit
You can pay a relative and still deduct it, with limits. The caregiver cannot be the child’s parent, your spouse or common-law partner, someone you claim a dependant credit for, or a person under 18 who is related to you. “Related” is narrower than most people assume: a brother, sister, or in-law counts, but a niece, nephew, aunt, or uncle does not.4Canada Revenue Agency. Line 21400 – Child Care Expenses – Expenses You Can Claim Paying your 20-year-old nephew to babysit all summer is deductible. Paying your 17-year-old sister is not.
The Ontario CARE Tax Credit
On top of the federal deduction, Ontario families with household income under $150,000 can claim the Childcare Access and Relief from Expenses (CARE) tax credit. It is refundable, meaning it pays out even if you owe no provincial tax, and it uses the same expenses you report federally, so you don’t need separate receipts.5Ontario. Ontario Child Care Tax Credit
The maximum eligible expense per child is $8,000 for a child under 7, $5,000 for a child aged 7 to 16, and $11,000 for a child with a severe disability. The percentage of those expenses that becomes a credit depends on family income: 75% at $20,000 or less, tapering down as income rises and reaching zero above $150,000.5Ontario. Ontario Child Care Tax Credit A family earning $50,000 with one child under seven in full-time daycare receives roughly 55% of their eligible expenses back through CARE, in addition to the federal deduction.
You calculate the credit on Schedule ON479-A, part of the Ontario tax package.6Canada Revenue Agency. 5006-TCA Schedule ON479-A, Ontario Childcare Access and Relief from Expenses (CARE) Tax Credit
If Your Employer Pays for Daycare
Employer-paid childcare is usually a taxable benefit that shows up on your T4. The exception is an on-site daycare directly managed at your workplace, available to all employees at no or minimal cost, and not open to the public, which is non-taxable.7Canada Revenue Agency. Child Care Expenses When the benefit is taxable, the amount is added to your income and you can then deduct the same amount as a child care expense, cancelling it out. What you cannot do is deduct expenses that were covered by a non-taxable reimbursement.
Filing and Receipts
You calculate the federal deduction on Form T778, which walks you through the per-child limits, the two-thirds earned income cap, and the lower-income rule. The final number goes on Line 21400.8Canada Revenue Agency. T778 Child Care Expenses Deduction
Every receipt needs the provider’s name, address, and the amount paid. If an individual provided the care, the receipt must show their Social Insurance Number.9Canada Revenue Agency. How to Claim – Line 21400 – Child Care Expenses A daycare centre or organization should show its business number.10Canada Revenue Agency. Issuing Receipts for Daycare Payment method doesn’t matter to the CRA — cheque, e-transfer, and cash all qualify as long as the receipt is in order.
If you file electronically, keep the receipts rather than mailing them. Hold onto them for at least six years in case the CRA reviews your claim.11Canada Revenue Agency. How Long Should You Keep Your Income Tax Records Post-assessment reviews of child care claims are common, and lost receipts mean a lost deduction.