8 June 2010 External T.I. 2010-0360281E5 - Deductibility of pre-school fees

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 pre-school fees paid on account of a taxpayer's three-year old daughter are deductible to the taxpayer

Position: Yes.

Reasons: Such payments are considered to be eligible child care expenses for the purposes of subsection 63(3) of the Act and therefore are deductible

XXXXXXXXXX
									2010-036028
									T. Elsey

June 8, 2010

Dear XXXXXXXXXX :

Re: Eligibility for tax deduction - Child's pre-school fees

We are writing in response to your email dated March 11, 2010 in which you have asked for our views as to whether pre-school fees paid on account of your three-year-old daughter are deductible child care expenses.

Written confirmation of the tax implications inherent in particular transactions may only be provided by this Directorate where the transactions are proposed and are the subject matter of an advance income tax ruling submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. This Information Circular and other Canada Revenue Agency (CRA) publications can be accessed on the Internet at http://www.cra-arc.gc.ca/formspubs/menu-e.html. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. Although we cannot comment on your specific situation, we are prepared to provide the following general comments, which may be of assistance.

Section 63 of the Income Tax Act (the "Act") provides rules concerning the deductibility of child care expenses in computing an individual's income. Qualifying amounts paid for child care that meet the definition of "child care expense" in subsection 63(3) of the Act are deductible to a taxpayer, subject to the limitations in subsection 63(1) and 63(2) of the Act. Under subsection 63(2) of the Act, one such limitation is that when more than one taxpayer contributes to the support of an eligible child, the child care expense deduction must generally be claimed by the taxpayer with the lower income for the year.

Child care expense as defined in subsection 63(3) of the Act means an expense incurred in Canada for the purpose of proving child care services including baby sitting services, day nursery services or services provided at a boarding school or camp as long as the services were provided to enable the taxpayer to perform duties of an office or employment, carry on a business, carry on research or similar work or to attend school.

Further, the services must have been provided by a resident of Canada and by a person other than the child's father or mother or by a person who is a supporting person of the child or by a person that is under 18 years of age and related to the taxpayer. Paragraph two of IT-495R3, Child Care Expenses, lists several examples of eligible child care expenses.

Based on the facts provided in your email, we understand that your child is three years old and that your child attended a pre-school located in Alberta, which is the province in which you and your family reside. Unless it is clear that pre-school fees were paid in respect of a program of education, we are of the view that such fees for a three-year-old child are akin to day nursery services and would meet the definition of "child care expenses" in subsection 63(3) of the Act. Therefore, assuming your child's pre-school fees were incurred so that both you and your spouse could work or attend a secondary school or designated educational institution, that you resided with your child at the time the pre-school expenses were incurred and that the pre-school is located in Canada, the fees would be deductible (subject to the limitations in subsection 63(1) and 63(2) of the Act).

For further information on how to calculate the deduction and for guidance regarding how to report the deduction on your income tax return, please refer to the information sheet to Form T778, Child Care Expenses Deduction for 2009.

While we trust that our comments will be of assistance to you, they are given in accordance with the practice referred to in paragraph 22 of IC 70-6R5 and are not binding on the CRA in respect of any particular situation.

Yours truly,

Randy Hewlett
for Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch