One of the most common questions that Edmonton bookkeeping gets from parents. Is if they are able to claim their childcare expenses on their personal tax return. And if they are able to, how much can they claim.
While childcare expenses are allowed to be claimed on a personal tax return. There are many different exceptions to how much can get claimed. Based on the age of their children, and if their child is disabled or not.
The first thing that new parents needs to understand. Is that in order to claim childcare. The person who is claiming the childcare, needs the childcare in order to hold down a job. Or they needs childcare in order to carry on running their business. Or they are attending a designated education institute such as a university or college.
Another exception is a person will be able to claim childcare expenses. If they are doing research that is being funded by a grant. If the parents that is going to claim childcare expenses falls into these categories. Then they are able to claim childcare expenses on their personal tax return.
However, this is dependent on the age of a child. As well as how much money a person is making. To be able to figure out how much money they can claim on their tax return. For instance, children need to be under seventeen by the end of the tax year.
In order to claim childcare. However, there is an exception to this. And that exception is if their child has a disability, and is dependent on apparent for care. They can be older than seventeen and get their childcare expenses deducted.
The next question that parents often have for Edmonton bookkeeping. Is if childcare expenses can be paid to anyone. While the childcare expenses can include a babysitter, a daycare, a boarding school or a day camp or summer camp. They have to be Canadian residents.
Childcare expenses also cannot be claimed to regular programs at schools. Therefore, school fees and school expenses such as books or uniforms cannot be claimed. As well as additional school expenses such as a field trip, or a school sports team.
Parents also wonder if they can claim payments that were made to a relative for their childcare. And while parents cannot claim childcare expenses to immediate relatives. They can claim childcare expenses if the relative is more distant. Such as nieces or nephews. Or and or uncles.
However, parents need to keep in mind that if Canada revenue agency audits them and looks at their childcare expenses. They will ask the childcare provider for their social insurance number. So if they are an immediate relative. It will be discovered.
As well, Canada revenue agency will look for that person’s income on their tax return. Which means whoever is providing the childcare. Must claimant as income on their personal tax return. In order to avoid getting in trouble with Canada revenue agency.
With how many exceptions there are two what childcare expenses can be claimed and how much. Any parents are best hiring an Edmonton bookkeeping company. In order to help them navigate this complex issue.
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Since the average Canadian ends up paying about 43% of their entire income in a variety of taxes says Edmonton bookkeeping. Many Canadians try to claim as many expenses as possible on their tax return. So that they can minimize the amount of taxes that they have to pay.
Therefore, parents often wonder if they can claim their childcare expenses on their tax return. And if so, how much they can claim. This is why Edmonton bookkeeping often get parents asking if both of the parents can claim the expense.
Typically, only one parent will claim the childcare expenses. In this parent is usually the one earning the least amount of money in the household. Both parents are allowed to claim childcare expenses.
However, the total amount that both parents claim. Cannot exceed the maximum amount that is claimable by one parent. Therefore, parents who are both claiming the expense. Need to be very careful not to exceed the amount allowed by Canada revenue agency.
The next question parents often have, is what is that limit that they can claim. And how is it calculated. The total amount claimed cannot exceed to two thirds of a parents income. Unless the child is disabled.
The specific amount that can be claimed per child depends on their age, and if that child has a disability as well. Because this is so complex, the best resource is contacting their Edmonton bookkeeping company. And letting them help with managing how much expenses can be claimed. Based on the children’s ages.
Since the amount that a parent can claim is dependent on their income as well. If a parent is a business owner. They need to let their accountants know if they are the ones claiming the childcare expenses.
The reason why, is so that their accountant can ensure that they are getting enough money as salary instead of dividends. To allow them to claim the maximum amount in childcare expenses.
By claiming more salary instead of dividends, can allow business owners to claim the maximum amount of childcare expenses possible. And can be a very effective tax strategy. As long as the accountant knows how much in childcare expenses the parent wishes to claim.
And although the lower earning parent typically will claim the childcare expenses. There are exceptions for parents who have a higher income to claim the childcare expenses. The exceptions include situations where the parents are separated. As long as they have been separated for ninety days at some point within the year.
Another exception for the higher income earning parent to claim childcare expenses. Is if one of the parents is in prison, or if they are attending a full-time or part-time education program. Or have a disability, whether it is long-term or short-term. That makes them unable to care for their child for that period of time.
Ultimately, this can be a complex issue. And if parents need help figuring out what childcare expenses can be claimed. And how much. Should hire an Edmonton bookkeeping company. Will be able to help them navigate this complex issue without problem.