The childcare expense deduction lets you deduct up to $8,000 per child under 7, $5,000 per child aged 7–16, and $11,000 per child with a disability. It must be claimed by the lower-income spouse. The deduction also cannot exceed two-thirds of the lower-income spouse's earned income. File using Form T778 and keep receipts with the caregiver's SIN or business number.
What Is the Childcare Expense Deduction?
The childcare expense deduction (line 21400 on your T1 return) allows parents to deduct eligible childcare costs from their income. Unlike a tax credit, this is a deduction — it reduces the income on which you're taxed, so the actual tax savings depend on your marginal rate.
For the lower-income spouse in Ontario earning $60,000 (marginal rate approximately 33.89%), a $5,000 childcare deduction saves roughly $1,695 in combined federal and provincial tax. At $90,000 income (marginal rate ~43.41%), a $5,000 deduction saves around $2,170.
Per-Child Limits for 2025
| Child's Situation | Maximum Deduction Per Child |
|---|---|
| Under 7 years old at December 31, 2025 | $8,000 |
| Aged 7 to 16 at any point in 2025 | $5,000 |
| Any age, eligible for Disability Tax Credit | $11,000 |
The child's age is determined as of December 31, 2025. So a child who turns 7 in December 2025 is treated as a 7-year-old for the entire 2025 tax year — the $8,000 limit does not apply. A child who turns 7 in January 2026 remains under 7 for all of 2025 and qualifies for the $8,000 limit.
The deduction is per child, not per family. A couple with two children under 7 and one child aged 9 can deduct up to $8,000 + $8,000 + $5,000 = $21,000 in childcare expenses (subject to the earned income limit).
The Two-Thirds of Earned Income Limit
Even if your actual childcare expenses exceed the per-child limits, the total deduction cannot exceed two-thirds of the lower-income spouse's earned income. Earned income for this purpose includes employment income, self-employment net income, research grants, and certain other amounts — but not investment income, rental income, or RRSP withdrawals.
Suppose you have two children under 7 and paid $16,000 in daycare. The lower-income spouse earned $18,000 in employment income. The per-child limit would allow up to $16,000. But two-thirds of $18,000 = $12,000. The deductible amount is the lesser: $12,000. The remaining $4,000 cannot be claimed by the higher-income spouse (with limited exceptions).
Who Must Claim the Deduction?
CRA requires the lower-income spouse or common-law partner to claim the childcare expense deduction. This is one of the most misunderstood rules in Canadian tax law — many couples assume the higher-income spouse should claim it for a bigger tax saving, but that's not how it works.
The rationale: the deduction is meant to allow the lower-income parent to earn income (by having someone else care for the children). It's attributed to the lower earner.
The higher-income spouse can claim the deduction only in specific situations:
- The lower-income spouse was enrolled in full-time education at a designated educational institution during the year (part-time education also allows some claims, with reduced limits)
- The lower-income spouse was confined to a prison or similar institution for at least two weeks during the year
- The lower-income spouse was physically or mentally infirm and unable to care for the child
- The spouses separated for at least 90 days during the year due to relationship breakdown
What Qualifies as a Childcare Expense?
Eligible childcare expenses are payments made to allow you (and your spouse) to earn income, run a business, go to school, or carry on research. The care must be provided by someone other than the child's parent or a person under 18 for whom you can claim a dependent credit.
Eligible expenses include:
- Licensed daycare centres and nursery schools
- After-school programs and after-care at school
- Day camps and day sports schools (not overnight)
- Babysitters, nannies, and au pairs (Canadian residents)
- Boarding schools, overnight camps, and lodging — but only up to the weekly boarding school/camp limits ($175/week for children under 7 or with DTC; $100/week for children 7–16)
- Caregivers at home for a child with a disability
Not eligible:
- Overnight camps or boarding schools (above the weekly limits)
- Extracurricular activities (swimming lessons, hockey, dance) where childcare supervision is not the primary purpose
- Clothing, food, or other expenses
- Payments to the child's parent, or to a person under 18 you can claim as a dependent
- Medical or hospital care
- Tuition for kindergarten or higher education
Documentation Requirements: The SIN Rule
When paying an individual (nanny, babysitter, au pair), CRA requires you to obtain and record their Social Insurance Number (SIN). You must include the SIN on your T778 form. Payments to individuals without a SIN — for example, someone working without authorization in Canada — generally do not qualify.
When paying a business (licensed daycare centre, camp operator), you need the provider's business number or a receipt on official letterhead. You do not need a SIN from a registered business.
You do not submit receipts with your return, but keep them for at least six years in case CRA selects your return for review.
Nanny and Au Pair Considerations
Many families employ a nanny or au pair, making childcare expenses their largest single deductible cost. Key points:
- If you employ a nanny directly, you may be required to register as an employer and deduct CPP, EI, and income tax from their wages. Payments are deductible as childcare expenses.
- An agency fee paid to a placement agency for finding a nanny is not a childcare expense — only the wages paid to the nanny are eligible.
- If the nanny also does housework, only the childcare portion of their wages is deductible. CRA may ask for a written agreement specifying the split.
- If you pay cash without recording the nanny's SIN, you cannot claim the deduction and risk CRA disallowing it entirely on audit.
Single Parents
A single parent (no spouse or common-law partner) claims the childcare expense deduction as the sole claimant. There is no "lower-income spouse" rule to navigate. The deduction is still subject to the per-child limits and the two-thirds of earned income cap.
Separated Couples and Shared Custody
If you separated during 2025:
- While you were together, the lower-income spouse claims expenses paid during that period.
- After separation (for at least 90 days), each parent can claim the childcare expenses they personally paid for the children in their care.
In shared custody arrangements, each parent can only claim expenses for days the child was in their care, up to half of the annual per-child limit (or the actual amounts paid, whichever is less).
Part-Time Students and the Higher-Income Spouse Exception
If the lower-income spouse is enrolled in part-time studies at a designated educational institution, the higher-income spouse can claim up to $250 per week for children under 7 (or with DTC) or $166 per week for children aged 7–16, for each week the lower-income spouse was in school. This is subject to the per-child annual limit.
How to Claim: Form T778
You calculate your childcare expense deduction using Form T778 — Child Care Expenses Deduction. Here's the process:
- List all eligible childcare expenses, the provider's name, SIN or business number, and amounts paid.
- Calculate the lower-income spouse's earned income (usually employment or self-employment income).
- Apply the two-thirds earned income limit.
- Apply the per-child limits for each child.
- Enter the lesser of your eligible expenses and the calculated limit on line 21400 of your T1 return.
Most tax software (TurboTax, Wealthsimple Tax, StudioTax, etc.) guides you through this calculation automatically when you enter your childcare expenses.
See exactly how much your childcare deduction saves you
Enter your income and childcare expenses — our calculator shows your 2025 Ontario tax refund in real time.
Frequently Asked Questions
Who claims the childcare expense deduction in Canada?
The lower-income spouse or common-law partner must claim the childcare expense deduction. This is a strict CRA rule. The only exceptions are when the lower-income spouse is enrolled in full-time (or part-time) education at a designated institution, confined to a prison for at least two weeks, or has a physical or mental infirmity preventing them from caring for the child. In those cases, the higher-income spouse can claim — but only up to the lower weekly limits.
How much can I deduct for childcare expenses in 2025?
The per-child limits for 2025 are: $8,000 per child under 7 as of December 31, 2025; $5,000 per child aged 7 to 16; and $11,000 per child who qualifies for the Disability Tax Credit. The deduction is also capped at two-thirds of the lower-income spouse's earned income. You claim the least of: actual eligible expenses, the sum of per-child limits, and two-thirds of earned income.
Does summer camp count as a childcare expense?
Day camps count as eligible childcare expenses. Overnight or sleepaway camps do not qualify in full — only a weekly limit applies ($175/week for children under 7 or with DTC; $100/week for children 7–16) for boarding-type childcare. Sports schools and activities generally do not qualify unless the primary purpose is childcare supervision rather than instruction in a specific activity.
Do I need receipts for childcare expenses?
Yes. For individual caregivers (nannies, babysitters), you need their Social Insurance Number, which must be entered on Form T778. For licensed childcare businesses, keep official receipts showing the business name and amount paid. Do not attach receipts to your return — keep them for at least six years in case CRA requests them on review.
Can a single parent claim the childcare expense deduction?
Yes. A single parent with no spouse or common-law partner can claim the full deduction as the sole claimant. There is no "lower-income spouse" complication. The deduction is still limited by the per-child maximums and the two-thirds of earned income cap.