13 June 2012 External T.I. 2011-0430351E5 - Child Care Expense-Nanny Costs

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: Are specific Nanny costs eligible for the child care expense, such as:
1. Transportation costs for the caregiver to travel from the caregiver’s country of permanent residence to the location of work in Canada;
2. Interim medical insurance coverage; and
3. WSIB employer premiums.

Position: A question of fact

Reasons: If the costs fulfill the requirements of subsection 63(3), then yes.

XXXXXXXXXX
						2011-043035
						George A. Robertson, CMA
June 13, 2012

Dear XXXXXXXXXX:

Re: Child Care Expenses for a Live-in Caregiver

We are writing in response to your query of November 29, 2011, concerning the above topic, specifically:

Would the following also be eligible child care expenses?

• Transportation costs for the caregiver to travel from the caregiver’s country of permanent residence to the location of work in Canada [where care giving will take place]-(one time cost)
• Interim medical insurance coverage – 3 months in Ontario (one time cost)
• Workplace Safety Insurance (WSIB) employer premiums (ongoing)

Your query describes:

• The family has utilized the Live-in Caregiver Program (LCP). The LCP is a program under the management of the department of Citizen and Immigration Canada (CIC).
• The family employs a live-in caregiver under the LCP to take care of three children.
• The family has been informed that gross wages and employer portions of Canada Pension an Employment Insurance would be eligible expenses.

Our Comments

Generally, subsection 63(3) of the Income Tax Act (the Act) defines child care expense as:

. . . an expense incurred in a taxation year for the purpose of providing in Canada, for an eligible child of a taxpayer, child care services including baby sitting services, day nursery services or services provided at a boarding school or camp if the services were provided
(a) to enable the taxpayer, or the supporting person of the child for the year, who resided with the child at the time the expense was incurred,
(i) to perform the duties of an office or employment,
(ii) to carry on a business either alone or as a partner actively engaged in the business . . .

Paragraph 2 of Income Tax Interpretation Bulletin IT-495R3, Child Care Expenses refers to whom the expenses are made as be eligible,

Child care expenses include payments to:

• an eligible child care provider;
• a day nursery school or day-care centre;
• a day camp or day sports school;
• a boarding school or camp (including a sports school where lodging is involved); and
• an educational institution for the purpose of providing child care services.

The above is not an exhaustive list of deductible child care expenses.

The cost of transportation under the LCP, under CIC is identified, in the sample agreement template, as the responsibility of the employer. The LCP also classifies the cost of health care insurance as an employer cost and the employer agrees not to deduct money from the caregiver’s for this purpose.

The Ontario WSIB identifies that “A private householder who employs a domestic worker for more than 24 hours a week must register as an employer of domestic workers with the WSIB. . . [Emphasis added] This category includes the employment or provision of domestic workers such as, babysitters, nannies, and nursemaids. . .

Provided the requirements of section 63 are fulfilled, the identified costs would be child care expenses. If you require further assistance in determining eligible child care expenses please contact the Client Services Division of your local Tax Services Office.

Yours truly,

Sharmini Ratnasingham
Assistant Director
Personal and Credit Section
Financial Industries Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch