Subsection 63(1) - Child care expenses
Symes v. Canada, 94 DTC 6001,  4 S.C.R. 695
Because the purpose for which the taxpayer incurred her child care expenses came squarely within the definition of "child care expenses" in s. 63(3), she was precluded from deducting such expenses in accordance with the more general rules governing deductibility in ss.9 and 18(1)(a).
Allott v. The Queen, 2010 DTC 1382 [at 4521], 2010 TCC 232 (Informal Procedure)
The taxpayers were permitted to deduct babysitting expenses despite being unable to obtain a receipt from the teenage babysitter. The filing of receipts was "directory" rather than "mandatory."
Deputy Minister of Revenue for Quebec v. Letarte, 97 DTC 5515 (Queb. C.A.)
The taxpayer was entitled to present evidence that she had paid $8,660 in child care expenses in the year notwithstanding that she had receipts from the caregiver for only $4,000 and that Article 353 of the Taxation Act (Quebec) provided that no deduction could be taken in the absence of the provision of such receipts.
Bailey v. MNR (1980), 1 C.H.R.R. 193 (C.H.R.T.)
The former s. 63 was discriminatory because it excluded men from the benefit of the deduction, unless they were unmarried, separated or had a wife who was incapable of caring for the children because of an infirmity or confinement to prison.
Under the amended Quebec regime for subsidized child care, there is a core contribution of $7.30 per day, per child, which is paid directly for child care, and an additional contribution scaled to family income (of up to $12.70 per day, per child), which is payable to the ARQ when filing income tax returns for 2015 (in the spring of 2016). If the additional contribution is deductible, in what year may it be deducted? For example, would the additional contribution paid in the spring of 2016 in respect of care received in 2015 be deductible in 2015 or 2016? CRA responded:
Child care expenses are deductible provided that inter alia they are in respect of child care expenses incurred for services rendered during the year. Therefore, an Additional Contribution that meets all the requirements for deductibility under subsection 63(1)… as a child care expense may be deducted in computing the taxpayer's income in 2015 if the subsidized child care services were rendered during 2015, even if the calculation of the Additional Contribution is made when the individual's Québec income tax return for 2015 is completed in 2016.
Furthermore…they must be "paid". The CRA will consider that this condition is satisfied at the time of filing of the federal income tax return for 2015 if the additional contribution is paid to the Quebec Minister of Revenue by the due date applicable for that year. [T]he due date is defined in section 88.1 of the Educational Childcare Act….
Debra Gordon, "Child-Care Deduction", 1999 Canadian Tax Journal, No. 6, p. 1588.
Taxpayers who earn employment income rather than business income hire home babysitters as employees and receive hiring credit for small business (HCSB) by way of credit to their source deduction accounts. CRA stated:
[T]he employer's EI premiums are "child care expenses" within the meaning of subsection 63(3) that can be taken into account. in computing the deduction under subsection 63(1). Under paragraph 63(1)(d), the portion of the employer's contribution for which the employer is entitled to the HCSB is an amount in respect of which an individual is entitled to a refund that cannot be taken into account in the calculation of deductible child care expenses.
The proposed Temporary Parental Educational Support payments would be provided by the B.C. government to parents of children in kindergarten through grade seven in the public school system in the event that a labour dispute with teachers was not resolved. The payment would be $40 per day per eligible child to help offset the cost of tutoring, child care or supervision. CRA stated:
If the Payments provided are a reimbursement of, or specific assistance for child care expenses, it is likely that paragraph 63(1)(d) would apply and the Payments would reduce the child care expense deduction otherwise available. If the Payments are made based on a child's grade level, with no requirement for a child care expense to be incurred by the recipients, the Payments will likely not be "a reimbursement or any other form of assistance" in respect of child care expenses, and the available child care expense deduction would not be reduced.
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|Tax Topics - Income Tax Act - Section 9 - Exempt Receipts/Business||parent compensation for teachers' strike||92|
Subsection 63(2) - Income exceeding income of supporting person
George v. The Queen, 2010 DTC 1341 [at 4307], 2010 TCC 496 (Informal Procedure)
The taxpayer, who earned more than his spouse, could not deduct from income $10,000 of childcare expenses under s. 63. Woods J. at para. 8: "The appellant seeks an interpretation of section 63 which provides greater financial relief to families who care for severely disabled children. That may be desirable from a policy perspective, but it is not provided for in section 63."
The Queen v. McLaren, 90 DTC 6566 (FCTD)
The word "income" in s. 63(2) require the existence of a positive sum. Consequently, where the supporting person had no income, s. 63(2) did not apply.
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|Tax Topics - Income Tax Act - Section 3||96|
|Tax Topics - Statutory Interpretation - Resolving Ambiguity||37|
Subsection 63(3) - Definitions
Child Care Expense
Fannon v. Canada Revenue Agency, 2012 DTC 5130 [at 7247], 2012 FC 876, aff'd 2013 DTC 5088 [at 5975], 2013 FCA 99
The taxpayer's son did not reside with him when he incurred expenses in caring for his son, and therefore the expenses were not "child care expenses" under s. 63(3). Near J. confirmed that s. 63(3) is not discriminatory under the Charter, as it does not perpetuate a disadvantage by perpetuation of prejudice or stereotypes. The mere deprivation of a financial benefit that would be available to parents with custody of their children is not enough to establish discrimination against parents without custody.
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|Tax Topics - Other Legislation/Constitution - Charter (Constitution Act, 1982) - Subsection 15(1)||non-custody parents not stereotyped||80|
Kwan v. The Queen, 2018 TCC 184 (Informal Procedure)
The taxpayer and his spouse both worked full time and had two children, 10 and 12, who attended school on a full-time basis, ending at 3:00 pm. The Minister disallowed the taxpayer's claims of approximately $5,000 for child care expenses in his 2016 taxation year that were incurred on after-school activities (including chess programs, math tutoring classes, Chinese language classes and students hired to mind the two children), a week of camp and ski classes, on the basis that they did not qualify for “child care expenses” within the meaning of s. 63(3).
In allowing most of the expenses, Pizzitelli J stated (at paras 11 and 13):
[T]he purpose of the legislation is to assist parents who work by subsidizing child care expenses … .
...Given that goal, it is difficult to accept the Minister's conclusion that any expense related to looking after the child of a working parent should be denied solely because it included an educative element. Such an interpretation would clearly undermine the intent of the Parliament … .
He further quoted approvingly (at para. 13) the statement in Jones that “similar considerations should apply to recreational activities.”
After noting that bilingual university students charged $5 more per hour than high school students, and in rejecting (at para. 19) a Crown submission that “higher hourly expenses for class instructors or student minders should not be allowed if opportunity exists for incurring lower costs” he adopted the statement in Lessard (2003 TCC 266, at para. 12) that:
…The taxpayer is responsible for choosing…the child care services he or she wishes to use; the taxpayer makes this choice on the basis of the child's needs, and this choice is an exercise of parental discretion.
However, Pizzitelli J reduced (at paras 22 and 23) the claimed camp expenses by applying the 1/40th limitation in 63(3)(c), and disallowed in full a Saturday chess tournament and a program for full-day skiing on Fridays (i.e., during school hours).
Jones v. The Queen, 2006 DTC 3531, 2006 TCC 501 (Informal Procedure)
Woods J. accepted the taxpayer's evidence that she decided to enrol her twelve year old daughter in an after-school gym class to accommodate the taxpayer's employment duties. Accordingly, the fees qualified under s. 63.
McLelan v. The Queen, 95 DTC 856 (TCC)
The taxpayer was able to deduct the cost of a nanny for the period of approximately two months prior to her return to work given that, among other things, "owing to market conditions relative to securing a good nanny, especially in her residential area, she felt that it was the most prudent thing to do to hire the nanny in question as soon as the nanny was available" (at p. 859).
D'Amours v. MNR, 90 DTC 1827 (TCC)
At a time that the taxpayer was on maternity leave but was still entitled to receive salary from her employer in an amount, which in combination with unemployment and insurance, resulted in her receiving 95% of her previous salary, she continued to pay the fees of a regular babysitter, which were held to be deductible.
In the course of a general description of the child fitness tax credit (CFTC) and the children's arts tax credit (CATC), CRA stated:
Where an organization concludes that the program it offers qualifies for either the CFTC or the CATC while being a child care expense within the meaning of subsection 63(3), it should issue a single receipt containing the all the information relevant to the various tax measures. Depending on the taxpayer’s situation, the taxpayer will use the receipt either for child care expenses, or for the CFTC or the CATC.
A taxpayer, whose child was selected to join an elite hockey team that is linked to a distant school agreed with a host family in that area to provide lodging to the child during the school year. Are these accommodation expenses eligible as child care expenses? CRA responded:
[A]mounts paid to a boarding school or camp include amounts paid to a sports school where lodging is involved.
However … lodging expenses with a host family are not amounts paid to a sports school providing lodging services, and, consequently, they are not child care expenses for the purposes of subsection 63(3).
4 October 1996 T.I. 962579 (C.T.O. "Child Care Component of Fees Paid to Private School")
Although RC has no guidelines as to the percentage of total fees charged by private schools that represents child care expenses, amounts paid for after-school and before-school care will ordinarily qualify, as well as the actual per student cost of lunch time supervision.
14 December 1990 Memorandum (Tax Window, Prelim. No. 2, p. 16, ¶1066)
Expenses incurred for the purpose of providing child care services include advertising expenses, placement agency fees, and transportation expenses incurred to locate, interview or bring a care-giver to Canada.
31 May 1990 T.I. (October 1990 Access Letter, ¶1462)
Discussion of day-care and monitoring services provided by a college.
Would child care expenses qualify as such under s. 63(3) where a corporation carrying on a child care business renders child care services for their fair market value to the child of its sole shareholder and employee? CRA responded:
Under subparagraph (b)(i) of the definition, services cannot be provided by the father or mother of the child. However, there is nothing in the Act that prevents an individual from incorporating his or her business in order to provide child care services. Consequently, if a taxpayer satisfies all of the conditions for the application of section 63, the taxpayer may claim child care expenses as defined in subsection 63(3) even if the child care expenses were paid to a corporation to which the taxpayer is employed.
Are Quebec Parental Insurance Plan (QPIP) benefits received under the Act respecting Parental Insurance (Quebec) included in "earned income"? CRA responded:
QPIP tax benefits are not covered by any of the paragraphs in the definition of earned income in subsection 63(3). Rather … this type of benefit is included in computing a taxpayer's income under paragraph 56(1)(a). Indeed … subparagraph 56(1)(a)(vii) … provides that a benefit paid under [such] Act … will be included in computing a taxpayer's income … .
A parent (Parent1) who lived in Canada with an "eligible child" incurred related child care expenses in order to work as an employee. The other parent of the child (Parent2) is not resident in Canada. The parents are married and not living apart because of a marriage breakdown. Is Parent2 considered a "supporting person." CRA responded that its:
practice is to consider that if a person has lived with the taxpayer, the person is considered to have resided with the taxpayer for purposes of the child care expenses deduction. …
Parent1 does not have to consider Parent2 when completing Form T778 as Parent2 is not a "supporting person" for purposes of the child care expenses deduction. Indeed, Parent1 and Parent2 have not lived together during the year.
In connection with finding that child care expenses incurred in the year, in the context of the correspondent living separate and apart from the correspondent’s spouse but their living under the same roof with their children, will be deductible by the parent who paid the child care expenses, provided that all the conditions for claiming the deduction are satisfied, CRA stated:
[T]here does not appear to be a "supporting person" … in the situation you have presented to us, since even if you lived in the same household as your spouse, you likely did not "reside with" her at any time during the first 60 days of 2010 … .
In this case, child care expenses may be deducted under subsection 63(1) by the paying parent for child care expenses incurred by him or her in the year of separation, provided all other conditions for claiming the deduction are satisfied.
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|Tax Topics - Income Tax Act - Section 118 - Subsection 118(1) - Paragraph 118(1)(b)||two separated spouses living under the same roof required to agree on which one claims the s. 118(1)(b) credit||149|
|Tax Topics - Income Tax Act - Section 118 - Subsection 118(1) - Paragraph 118(1)(a)||joint payment of expenses incurred under the same roof did not preclud two separated spouses living “separate and apart”||157|