21 November 2007 External T.I. 2007-0232351E5 - Child Care Expenses

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Whether certain fees levied by a particular educational institution would qualify as child care expenses and whether the invoice issued by the particular institution could include amounts for tuition as well as child care.

Position: General comments but yes invoice can include both.

Reasons: The law.

XXXXXXXXXX 								2007-023235
									Michael Cooke
November 21, 2007

Re: Child Care Expenses

We are writing in reply to your correspondence of April 20, 2007, wherein you asked whether certain fees levied by your institution would qualify as child care expenses for the purposes of subsection 63(1) of the Income Tax Act ("Act") and whether the invoice issued by your institution could include amounts for tuition as well as child care.

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5 dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant tax services office. The following comments are, therefore, of a general nature only and are not binding on the Canada Revenue Agency ("CRA") with respect to your particular situation.

Subsection 63 of the Act allows a taxpayer to claim a deduction for child care expenses that are incurred for the purpose of allowing the taxpayer to work, carry on a business or undertake certain educational/research activities. The rules for child care expenses are discussed in detail in Interpretation Bulletin IT-495R3, Child Care Expenses ("IT-495R3"), a copy of which can be obtained from CRA's website at http://www.cra-arc.gc.ca.

As stated in paragraph 3 of IT-495R3, when an educational institution offers child care as well as an educational program, only the portion of the fees paid to the institution relating to child care (i.e., supervision before and after classes or during the lunch period) may qualify as child care expenses. However, when the payment made is for a child who is under the compulsory school age, the services being provided are generally considered to be for child care (rather than education) unless the facts indicate otherwise.

In this regard, a program of education can be distinguished from child care in that a program of education is more goal-oriented and the child is expected to learn skills and progress through a planned program of instruction whereas a child in a typical child care setting is not expected to achieve any specific educational goals. When an educational institution offers a full day kindergarten program, no amount of the fees payable for such program is deductible as a child care expense. On the other hand, if an educational institution provides a separate or additional program of child care in addition to a half day or alternate day kindergarten program, the portion of the fees related to the child care would qualify as a child care expense.

In a situation in which an educational institution provides education and child care services, it is not mandatory that child care services be billed or invoiced separately. However, a written allocation, supported by facts, of the charges for education and child care services rendered in the particular year and proof of the actual payment of such charges would be acceptable as evidence for the purpose of the child care expenses deduction.

Paragraph 5 of IT-495R3 lists certain types of expenditures that are specifically excluded from the definition of child care. While the determination of any particular expenditure as being in respect of child care or education will depend on the particular facts, it is our view that the cost of a school bag would generally not qualify as a child care expense.

We trust that our comments will be of assistance.

Yours truly,

Renée Shields
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch