Child Care Expense Deduction in Canada 2025

If you pay for child care so you or your spouse can work, attend school, or run a business, you may be able to deduct those expenses from your income. The child care expense deduction is one of the most valuable deductions available to Canadian families with young children.

Deduction Limits by Child Age

These limits apply per child. A family with two children under 7 could deduct up to $16,000 in child care expenses. The deduction is limited to 2/3 of the lower-income spouse's earned income.

What Qualifies as a Child Care Expense?

Eligible child care expenses include payments made for the care of a child so that you (or your spouse) can earn income, carry on a business, or attend school full-time or part-time:

• Licensed daycare centres
• Nursery schools and preschools
• Nannies and babysitters (must provide their SIN)
• Day camps and day sports schools (not overnight)
• Boarding schools and overnight camps (with limits)
• After-school programs
• Caregivers who care for a child with a disability

What Does NOT Qualify

• Clothing, food, and medical expenses for the child
• Amounts paid to a parent of the child, or to a person under 18 who is related to you
• Tuition fees for school (Kindergarten to Grade 12)
• Payments made for overnight camps above the weekly limit ($200/week for children 7–16; $275/week under 7; $125/week per child over 16 with disability)

Who Claims the Deduction?

The deduction must be claimed by the lower-income spouse or common-law partner. Exceptions where the higher-income spouse can claim include:

• The lower-income spouse was enrolled in full-time or part-time education
• The lower-income spouse was incapable of caring for children due to mental or physical infirmity
• The spouses were separated for at least 90 days during the year
• Single parents claim on their own return

Receipts and Documentation

You must have receipts for all claimed child care expenses. Receipts from a daycare or after-school program should show the provider's name, address, and business number. If you pay a nanny or individual caregiver, you need their SIN and must issue them a T4 if you are considered their employer. The CRA does not require you to submit receipts with your return, but you must keep them in case of review.

How to Claim

Child care expenses are claimed on Form T778 (Child Care Expenses Deduction), which is included in all major tax software. The deduction reduces your net income on line 21400 of your T1 return. Because it is a deduction (not a credit), it reduces your taxable income at your marginal rate.

Interaction with Other Benefits

Reducing your net income through the child care deduction also increases income-tested benefits. A lower net income means higher Canada Child Benefit payments, higher GST/HST Credit, and eligibility for other means-tested programs. The cascading effect makes this deduction even more valuable than the face-value tax saving.