New parents who are going back to work for the first time, often ask their Edmonton bookkeeping company if they can claim childcare expenses on their personal tax return. And if they can claim childcare expenses. How much are they able to claim is an important question.
While parents can claim childcare expenses on their personal tax return. It is based on not only the age of their children, and the income that a parent is earning.
But also depends on who is looking after the child, and what institution they are claiming. Because not everything is eligible.
One of the first things that new parents need to understand, is that immediate relatives are not eligible to have childcare expenses be claimed. This means parents, or children cannot claim childcare expenses. For example, when a parent’s sixteen-year-old child is hired to look after the parents new baby. This is not allowed.
However, more distant relatives can be paid for child care and have it be a claimable expense. If they are as distant as nieces and nephews, or aunts and uncles.
Parents and the person who is looking after the child needs to be aware. That if the parent is ever audited by Canada revenue agency. The childcare provider will need to give Canada revenue agency their social insurance number.
And if they are not claiming the amount they earned as income. The childcare provider can also trigger problems with Canada revenue agency as well.
Also, Canada revenue agency specifies that if it is a relative, or a babysitter. That those people must also be Canadian citizens. But that is not the only exception on what childcare expenses are eligible to be claimed.
Edmonton bookkeeping says daycare’s, boarding schools, a day camp or a summer camp can all have those expenses be claimed. Regular educational institutions however cannot be cleaned.
Institutions such as a child’s regular school. Even paying for fees within that school such as uniforms, books and field trips. Or even sports teams within that school. All cannot be claimable expenses on a parents income tax return.
Also, the age of the child matters. As to whether they can have their expenses be claimed. And their age depends on how much money in expenses their parents can claim. Further complicating this is whether or not a child is disabled. And whether that disabled child is illegible to receive disability payments.
For example, if a parent sends their child to a boarding school or summer camp. They will have a maximum amount that they can claim based on their child’s age, each week.
Children under the age of seven can have up to two hundred dollars in expenses to claim. Children between the ages of seven and seventeen can all claim hundred and twenty-five dollars a week in childcare expenses. But if their child is disabled, they can claim two hundred and seventy-five dollars per week in expenses.
Because this is a very complex issue. If parents are having a difficult time remembering the exceptions. Or wanting to avoid making errors. Can hire and Edmonton bookkeeping company. Will be more than happy to complete their year-end tax return. And ensure that they are not making critical errors on claiming childcare expenses.
Did you know there is a service dedicated to Edmonton Bookkeeping?
One of the most common questions that Edmonton bookkeeping gets from parents is in regard to claiming childcare expenses on their income tax return. While parents are allowed to claim expenses, it must be in order for them to be able to hold down a job.
Holding down a job, or running their business is a necessity in order for that parent to claim childcare expenses. If the parent is attending school, through a designated educational Institute. Such as University, College or something similar. They can also claim their childcare expenses.
New parents wondering if the school they are attending is eligible. They can visit the Canada revenue agency website. Where list of all of the various institutions are listed. Allowing parents to claim their childcare expenses.
And lastly, Edmonton bookkeeping says if parents are doing research. And are being funded by a grant. They also can claim their childcare expenses. On their income tax return.
However, the amount of child care expenses that they can claim is based on that parents income. The amount that they claim cannot exceed two thirds of their income in total. Even if both parents are splitting the childcare expenses that they are claiming.
Edmonton bookkeeping says typically the parent that earns a lower income ends up claiming the childcare expenses. Either spouse can claim the deduction. Or both of them can share this. But the total amount claimed. Cannot exceed one parents total amount of expenses they can claim.
And while the total amount of childcare expenses that a parent can claim depends on their income. And that the lower income earning parent typically claims these. There are exceptions to this rule. Allowing the parent with the higher income claim the childcare expenses.
One of these exceptions is if the spouses are separated, the higher income earning parent can claim childcare expenses. Canada revenue agency defines parents who are separated, to have been separated for a total of ninety days within that year.
Other exceptions to allow higher income earning parent to claim childcare expenses. Is if one spouse is in prison, or if one spouse is going to school. Or even if one spouse is unable to care for their child due to a long-term or short-term disability.
Ultimately, Edmonton bookkeeping says that the decision on which parent claims the childcare expenses. Ultimately becomes a tax planning issue. And if parents would like to save the most taxes possible. They should contact their bookkeeper. In order to get the help they need to complete their tax return.
So that they can end up with the most tax savings possible. And at the same time, avoid making errors that could cost them either in additional taxes they have to pay. Or getting flagged for being audited by Canada revenue agency.