Child Care vs Medical Expense – Part 1

I received an email recently from a reader asking about child care expenses. I’ve copied it below:

Hi Milburn,

Long-time fan and avid user of your website. You might recall that we have emailed a few times over the years too.

I have a question about claiming childcare costs properly on my annual taxes. Since our team of BIs primarily work 1-1 with my son, I have only been claiming those hours as childcare. For example, I don’t think a team meeting of 4 individuals would qualify as childcare.

The other monthly BI costs are related to attending team meetings, materials prep and occasional phone call with me.

I have been issuing a separate monthly receipt labelling these costs as “other intervention services” and not claiming them on my taxes. However I’ve started to think that these activities may qualify as “tutoring services” under the medical expense tax credit. Although these activities are not directly involving my son, they are valuable to his long-term care and development.

What are your thoughts on my approach for claiming these monthly activities under these categories?

I’m sure this differentiation and clarity would be helpful to your readers.

Much appreciated,

And my response:

Hi xxxx

Good to hear from you again.

Firstly, you are on the right track by claiming child care expenses before medical expenses.  You may qualify for child care claims if:

  • You and your partner are working
  • You are going to school
  • You are single or
  • You are carrying on research or similar work.

Child care is a tax deduction (much like an RRSP) and will often provide a greater tax reduction than medical expenses which is a tax credit. This is especially true if you are in a higher income tax bracket.

When I create an invoice and receipt for my BI’s, I ensure that the service listed matches what I want to claim on my taxes.  If I qualify for child care claims, that is what the receipt and invoice will show.

Team meetings and overlaps are all part of the process and I don’t believe that a knowing person would suggest that this is improper.  To keep the bureaucrats happy, we will keep things clear and not give them details that they don’t understand.  The service provided should indicate “Child Care” and nothing else.

Once you have reached the $11,000 limit for child care (assuming your child qualifies for the Disability Tax Credit) you no longer need child care receipts.  I suggest that the service now indicate “Tutoring” which is claimable as a medical expense.  The only point here is that you need a doctor’s letter indicating the need for such services.  Once again, do not put extra detail on the invoices and receipts as this will only confuse CRA.

Hope this helps

Regards

Was my advice correct? Is it better to claim child care or medical expenses? The answer turns out to be more complex than one might imagine.

Next week, I will dive into the topic and you might find the answers surprising.

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