The New Ontario CARE Credit

Ontario is rolling out a tax credit that families can use with respect to childcare costs. The Childcare Access and Relief from Expenses (CARE) credit is a new refundable tax credit for Ontarians to help with specific expenses that can be quite the financial burden to many families. Here’s what you need to know:

What is it?

 The CARE credit is calculated as a percentage of the existing Child Care Expense Deduction which families can already claim for tax relief on eligible childcare expenses. With the new CARE credit, families could receive up to the following amounts for eligible expenses:

1. $6,000 per child under the age of seven;
2. $3,750 per child between the ages of seven and 16; and
3. $8,250 per child with a severe disability.

Eligible expenses include child care services provided by a caregiver, child care centres, nannies, overnight sports schools or camps where lodging is involved, the portion of fees for an educational institution that relates to child care, and day camps where the camp is meant to provide care for children.

The Government also provides a list of ineligible expenses, which include medical care, clothing costs, transportation costs, tuition, fees for recreational activities or lessons such as swimming lessons, sports teams, or Scouts, or child care provided by a child’s parent or relative under 18 years, such as an older sibling or cousin.

It is important to keep in mind that the credit does not apply to total childcare expenses, but only to the eligible portions of it.

Who can claim it?

 To be eligible to claim this credit, a family:

1. Has to have a family income less than or equal to $150,000;
2. Must be an Ontario resident at the end of the tax year; and
3. Must be eligible to claim the existing Child Care Expense Deduction.

Separately, you must also meet Canada Revenue Agency requirements for the child for whom you claim expenses, specifically:

1. The child must be the child of the person who is claiming the credit, the child of a common-law partner or spouse, and be dependent on the person making the claim or that person’s partner;
2. The child must be under 16 years of age unless the child is a disabled dependent child; and
3. The child’s income cannot exceed $12,069.

How is the credit calculated and claimed?

The credit is claimed on one’s tax return. The amount to be claimed varies from family to family as it works with the formula that is already in place for the Child Care Expense Deduction and a family’s income. Sample calculations are provided by the Ontario Government here. It is best to work with an accountant on this to make sure the correct amounts have been considered and calculated. As with any claim made on an income tax return, it is important to keep all of your receipts related to childcare expenses for the given year.

When can the credit be claimed?

You will be able to claim this tax credit when you file your 2019 personal income tax return this year, in 2020.

This blog post was written by Olivia Koneval, a member of the Family Law team.  She can be reached at 613-369-0367 or at olivia.koneval@mannlawyers.com.