Updated: April 2025  |  bremo.io financial guides

Childcare Tax Deduction in Canada — How to Claim It

Childcare expenses in Canada are tax-deductible, which means paying for daycare, a nanny, or after-school care can reduce your taxable income. The childcare expense deduction is claimed on Line 21400 of your T1 income tax return and can result in meaningful tax savings for families.

What Qualifies as an Eligible Childcare Expense?

Eligible childcare expenses include payments made to:

• Licensed daycare centres
• Home daycares (regulated or unregulated, as long as the provider gives you a receipt)
• Nannies and babysitters (if they have a SIN and the payments are documented)
• Boarding schools and overnight camps (limited deduction)
• Day camps and day sports schools
• Before and after school programs

Expenses paid to a relative who lives with you or who is under 18 are generally not eligible. Payments to the other parent of the child are also not deductible.

Maximum Deduction Limits

The deduction is limited to two-thirds of the lower-income earner's earned income, so lower-income earners with part-time or reduced income can't claim the full limit in some cases.

Who Claims the Deduction?

The deduction must generally be claimed by the lower-income spouse or common-law partner. The higher-income partner can claim it only in specific situations, including:

• The lower-income spouse is in school full-time or part-time
• The lower-income spouse is incapacitated or in hospital
• The couple is separated

This rule exists because the deduction is more valuable to a higher earner (it saves more tax at a higher marginal rate), but the CRA wants to attribute the claim to the person actually caring for the child.

How to Claim It

At tax time:

1. Collect receipts or written statements from all childcare providers that show the amount paid and the provider's SIN (for individuals)
2. Complete Form T778 — Child Care Expenses Deduction
3. Enter the deductible amount on Line 21400 of your T1 return

The CRA may ask for receipts if you're audited, so keep all documentation for at least six years.

How Much Tax Will You Save?

The tax savings depend on your marginal tax rate (provincial + federal). As a rough guide:

Interaction with the $10/Day Program

If you're in a subsidized childcare space and your out-of-pocket cost is very low, the tax deduction is less valuable. The deduction is based on what you actually paid — not the full market value of the care. If you're paying $200/month in a $10/day space, you can only claim what you paid.