Child Care Expenses after Separation

Separation is already a lot to manage. Add daycare receipts, shared custody schedules, reimbursements between parents, and tax filing deadlines and it can get confusing quickly.

One area that often needs a closer look is the child care expense deduction. This is especially true in the first year of separation, when parents may have lived together for part of the year, separated partway through the year, and shared child care costs in different ways.

The good news? The rules become easier to work through once you build a clear timeline.

How does the child care expense deduction work?

Child care expenses are claimed as a deduction on the personal tax return, not as a tax credit. That means the claim reduces income for tax purposes, rather than directly reducing tax payable dollar-for-dollar.

A practical example of this: if a parent can claim $5,000 in child care expenses, that does not mean their tax refund increases by $5,000. Instead, their taxable income is reduced by $5,000, and the actual tax savings depend on their income and tax rate.

The claim is calculated on Form T778, Child Care Expenses Deduction, and the allowable amount of child care expenses are claimed on line 21400 of the T1, personal tax return.

First, what are child care expenses?

Child care expenses are amounts paid to have someone care for an eligible child so that a parent or other eligible person can work, run a business, attend school, or carry-on grant-funded research.

Common examples include:

Daycare or nursery school fees,
Educational institutions (only the part that relates to child care services),
Babysitting and caregivers providing child care services,
Day camps and day sports schools (where the primary goal is child care),
Overnight camps where lodging is involved, and
Boarding school fees.

Not every child-related cost qualifies. For example, medical care, clothing, transportation, and general education or recreation costs are generally not considered child care expenses for this deduction.

If child care costs are paid to an individual, the provider cannot be the eligible child’s parent, the tax payer’s spouse/common-law partner if the tax payer is the child’s parent, a person whom the taxpayer or another person claimed dependent/caregiver amounts, or a related person under 18 years of age.

Note: Weekly caps apply to camp and boarding school fees, based on the periodic child care expense amount and the number of weeks attended. CRA flags this limitation on Form T778.

In most cases, the services must be provided in Canada by a Canadian resident, although CRA recognizes limited exceptions.

Who is an eligible child?

For child care expense purposes, an eligible child is generally:

Your child (or your spouse or common-law partner’s child), or
A child who is dependent on you (or your spouse or common-law partner), for support, provided the child’s income is below the annual threshold,
And is generally, under 16 years of age at sometime during the year (unless the child is dependent because of a mental or physical infirmity).

Note: For 2025, the child’s net income threshold is $16,129. For 2026 planning purposes, the threshold is expected to follow the unreduced maximum federal basic personal amount, which CRA payroll formulas show as $16,452, but confirm against the 2026 T1/T778 materials when released.

How much can be claimed?

The maximum child care expense claim depends on the child’s age (at the end of the year) and circumstances. For recent tax years, the annual limits are generally:

$8,000 for each child under age 7,
$5,000 for each child over age 6 at the end of the year and under 16 at any time during the year (unless the disability tax credit applies),
$5,000 for a child over 15 who has a mental or physical infirmity and is dependent on the taxpayer (or taxpayer’s spouse or common-law partner), and
$11,000 for a child in respect of whom a disability tax credit may be claimed.

There is also an income-based limit. In many cases, the claim cannot exceed two-thirds of the taxpayer’s earned income for the year.

Note: If actual child care costs are higher than the annual or income-based limit, the unused portion is not carried forward to a future year.

Who usually claims child care expenses?

When parents are together and there is a supporting person, child care expenses are usually claimed by the person with lower net income, unless one of the specific exceptions applies.

This is one of the reasons separation years can be confusing. The usual lower net income rule may not tell the whole story once the parents separate.

What changes in the year of separation?

In the year parents separate, the details matter. Where there has been a breakdown of the marriage or common-law relationship, and there is no reconciliation within 60 days after the end of the year, there is no “supporting person” for the year, and child care expenses are allowed only to the individual who resided with the eligible child, paid the expense, and incurred it so they could work, carry on business, attend school, or carry on grant-funded research.

In other words, the first year of separation is not just about who has the lower net income – it is about matching the expense to the parent, the timing, the child’s residence, and the reason the care was needed.

A separate rule applies where the parents lived together at some point during the year, were living separate and apart at year-end, and had been living separate and apart for at least 90 days in the year due to the breakdown (and did not begin residing together again within 60 days after year end). n that situation, the higher-income parent may be able to claim some child care expenses, but the claim is still subject to the higher-income taxpayer calculation on Form T778.

Note: The Income Tax Act definition of “supporting person” requires the other person to have resided with the taxpayer at some time in the year and within 60 days after year-end.

Can both separated parents claim child care expenses?

Sometimes, yes.

Where a child lived with each parent at different times during the year, such as in a shared custody arrangement, both parents may be able to claim child care expenses. However, each parent can generally only claim the expenses that relate to the period when the child lived with them and that they paid.

Note: The same expense cannot be claimed twice.

What if one parent pays the daycare bill and the other reimburses them?

This is common in shared custody arrangements.

A practical example of this is when Parent A paid the full daycare invoice, and Parent B reimburses them for their share. The paperwork becomes important, where:

The child care provider should issue the receipt to the parent to who paid the provider (e.g., Parent A),
The parent who received the reimbursement should issue a receipt to the other parent for the amount reimbursed (e.g., Parent A to Parent B), and
The reimbursing parent may be considered to have paid child care expenses equal to the reimbursement (e.g., Parent B).

Parent A is generally considered to have paid the gross amount less the reimbursement, and Parent B is generally considered to have paid the reimbursement amount.

Additionally, this helps support each parent’s claim if CRA asks for documentation later.

What if the payment is actually a support payment?

This is where the wording in an agreement can matter. If the amount paid from one parent to the other is a child care reimbursement, it may be treated differently than a support payment.

Where the payment is a support payment that is deductible to the paying parent and taxable to the receiving parent, CRA guidance indicates that the paying parent would not treat that payment as a child care expense.

Note: Under paragraph 63(1)(d) of the Income Tax Act, no deduction is available for child care expenses where the taxpayer is entitled to reimbursement or assistance from a taxable/deductible support arrangement, unless that amount is included in the recipient’s income and is not deductible in computing taxable income. Taxable/deductible support does not reduce the recipient’s child care expenses and is not a child care expense to the paying parent.

What if a parent remarries or enters a new common-law relationship?

If a parent remarries or enters a new common-law relationship, the new spouse or common-law partner may become a supporting person for child care expense purposes. Technically, if the new partner meets the supporting person definition, the ordinary lower-income/supporting-person rules can apply, and the new supporting person may be the one entitled to deduct the expenses.

That can affect who is entitled to claim the deduction, especially if the new supporting person has the lower income.

What records should parents keep?

Even if receipts are not sent to the CRA with electronically filed personal tax returns, the CRA and Income Tax Act require receipts and should be kept in case the CRA asks to review the claim later.

The provider should issue a receipt showing the services provided. If the provider is an individual, the receipt should show the individual’s SIN. CRA says the receipt can be in the taxpayer’s name or their spouse/common-law partner’s name.

Additional items to keep (in addition to receipts which may be requested in audit)

Proof of payment,
Reimbursement records between parents,
Receipts issued between parents (if one parent reimbursed the other),
Custody or parenting schedules, and
Separation agreement wording, especially where child care and support payments are both addressed.

Note: If the payee is an individual, the receipt must contain the individual’s social insurance number, and each receipt should be made out to the individual who paid the child care expenses.

Final thoughts: Build a timeline before claiming the deduction

In a separation year (or even years following), it is helpful to build a simple timeline before preparing the tax return as the same expense cannot be claimed by two people.

Parents should look at more than just daycare receipts – the claim should line up with the parenting schedule, who paid the expense, whether any reimbursements were made, and whether the payment was child care reimbursement or support.

A little extra organization can help avoid missed deductions, double claims, and ease potential follow-ups from the CRA later.

Child Care Expenses after Separation: What Parents Should Know at Tax Time

Child Care Expenses after Separation: What Parents Should Know at Tax Time