What child care expenses are deductible?

We all know that working parents can deduct the expenses incurred for having someone to look after their young children. But it is confusing what child care expenses are deductible. Sometimes, even the taxman is confused too.

In the case of Jones vs Canada, Ms. Jones has two young daughters who are 12 and 13 years of age. In her 2004 personal tax return, Ms. Jones claimed a deduction for fees paid to a gymnastics club totaling $1,415. The fees were paid for gymnastic classes attended by her daughters. A portion of the amount claimed, $984, was for after-school classes and the remainder, $431, was for summer and spring break gymnastics camps. The taxman allowed the amount of $431 which was paid for gymnastics camps but disallowed the amount of $984, which was paid for after-school classes. The taxman’s argument was that the fees paid for after-school classes were educational costs so that they were not qualified as child care expenses.

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Ms. Jones took the taxman to the court. The judge decided that those deductions should be allowed. According to the decision, to determine whether an activity is a ‘child care service’ or not, the essential question is what the primary reason is for enrolling the child in the activity. The main purpose for the enrollment of Ms. Jones’ daughters in after-school gym classes was to provide child care so that she was able to perform duties of employment. Therefore, the taxmen was ordered to reconsider and reassess on the basis that Ms. Jones was entitled to deduct additional child care expenses of $984.

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