The T778 form is used to claim the child care expenses deduction when filing your income tax and benefit return.
If you, your spouse, or your common-law partner, or another person had to pay someone to take care of a child that is considered eligible by the Canadian Revenue Agency (CRA), because you needed to work for an employer, work for yourself, attend an educational program, or carry out certain research work, then you can claim related child care expenses.
To claim child care expenses, the eligible child must have lived with you or your spouse, or common-law partner.
Usually, the related child care payments that can be claimed should have been paid to a Canadian resident carrying out child care services in Canada.
However, you may be able to still claim child care expenses if as a deemed or factual resident of Canada you paid for non-Canadian child care services outside of Canada.
Eligibility to Claim Child Care Expenses
To claim child care expenses, the child is usually expected to meet the following conditions:
- The child must belong to you or your spouse, or common-law partner.
- The child should be dependent on you or your spouse, or common-law partner, and have an income lower than the applicable basic personal amount for the year.
- The child must be younger than 16 years of age at some time in the tax year, or have an infirmity and is dependent on you or your spouse, or common-law partner.
As the taxpayer, you are eligible to claim child care expenses if the child lived with you, and you were either the parent of the child, the spouse or common-law partner to the parent of the child, or another eligible individual as determined by the CRA.
Expenses that Qualify as Child Care
It is important to know that not all child care expenses can qualify for a tax deduction.
The child care expenses that can be claimed using form T778 include, but are not limited to:
- Cost of caregivers who provide child care services
- Payments made to nursery schools and daycare centres
- Fees paid to educational institutions for child care services
- Cost for advertising incurred to locate a child care provider
- Cost for certain types of day camps and day sports schools for child care services
- Payments made to certain boarding schools, overnight sports schools, or camps, especially where lodging is involved
- Fees paid to child care placement agencies or mandatory registration fees
- The basic contribution made directly to subsidized childcare service providers in Quebec
- Cost of meals included in babysitting, day nursery, or day camp services
If you are not sure whether a child care cost qualifies for the child care expenses deduction, you can contact the CRA for clarifications.
Generally, you cannot claim child care expenses paid to someone related to you and younger than 18 years of age.
For example, if you paid a babysitter who is younger than 18 years and is related to you by blood, marriage, common-law partnership, or adoption, you cannot claim the expense as a tax deduction.
You will not be able to claim certain medical or hospital care expenses, clothing, transportation, or education costs, and board and lodging expenses.
How to Fill Out T778 Child Care Expenses Deduction Form
There are four parts that you need to fill in the T778 form.
This section allows you to provide information on total child care expenses paid.
You will need to provide the names and dates of birth of all your eligible children even if you did not pay child care expenses for all of them.
Then, you will also need to provide details on the actual child care expenses incurred for your eligible children.
In this section, you can calculate the allowable child care expenses deduction that you can claim based on the basic limit for child care expenses.
The basic limit is determined by factors such as your net income, the date of birth of the eligible child, the infirmity state of the eligible child, etc.
Generally, the person with a lower net income is eligible to claim the child care expense.
If you are the person with the higher net income and are claiming the child care expense deduction, this section allows you to calculate your allowable tax deduction.
This section is for calculating your allowable deduction if you were the only person supporting the eligible child while enrolled in an educational program or if you had the higher net income, and you and your spouse, or common-law partner were enrolled in an educational program.
Frequently Asked Questions
- What is the maximum deduction for child care expenses in 2021?
- Do babysitters have to pay taxes in Canada?
Anyone with net income that is greater than the federal tax basic personal amount is expected to pay taxes in Canada, including babysitters.
This amount changes yearly with indexation adjustments. For 202, the amount was set at $12,421 and can be as high as $13,808 based on a publication by the government of Canada.