To reduce the cost of continually increasing childcare costs in Ontario, the government of Ontario introduced a new refundable childcare tax credit.
The Childcare Access and Relief from Expenses (CARE) tax credit was unveiled early in 2019 in Premier Doug Ford’s first budget. His government pledged the measure would focus on benefits on low and moderate-income families and provide up to $6,000 a year for childcare costs.
The good news for parents that the new credit can be used on top of the existing Child Care Expense Deduction (CCED), which allows low-income families to save more on childcare.
The CARE credit is designed to benefits those with household incomes of less than $150,000.
Eligibility requirements for the CARE tax credit
You may be able to claim this tax credit if you meet all of the following conditions:
- You were a resident of Ontario at the end of the year.
- You claimed an amount for Child Care Expense Deduction on line 21400 of your tax return.
- have a family income less than or equal to $150,000.
The CARE credit is eligible for all types of childcare options: licensed daycare facilities, in-home caregivers, day camps, babysitters, and nannies.
An eligible child can be any of the following:
- your or your spouse’s or common-law partner’s child
- a child who was dependent upon you or your spouse or common-law partner and whose net income was $12,069 or less
The child must have been under 16 years of age at some time in the year; however, the age limit does not apply if the child had a physical or mental impairment and was dependent upon you or your spouse or common-law partner.
How to calculate the CARE tax credit
The families with a total income of $20,000 or less will qualify for a maximum amount of credit which is 75% of eligible childcare expenses.
Families could receive up to:
- $8,250 per child with a severe disability
- $6,000 per child under the age of seven
- $3,750 per child between the ages of seven and 16
For the families with income between $20,000 and $150,000, the amount of tax credit gradually decreased, and after $150,000 per year it is 0%
Below is the table showing all levels of the tax credit rate.
All levels of the Childcare Access and Relief from Expenses (CARE) tax credit.
Who can get the full benefits from the CARE tax credit?
The Financial Accountability Office of Ontario researched in September 2019 and said only 300 families across the province would receive the maximum $6,000 benefit. That is just 0.1% of those eligible for the CARE tax credit.
Most of the tax credit will go to families with income above the Ontario median, which is $63,700.
References:
- Ontario Child Care Tax Credit
- 5006-TCA Schedule ON479–A, Childcare Access and Relief from Expenses tax credit
Anna Grigoryan is a public accountant who provides accounting, bookkeeping and tax services to Small Business owners and individuals. She has more than ten years of professional experience in public accounting and a bachelor’s degree in Business Accounting. Anna is the founder and CEO of Taxory, an accounting firm located in Ontario, Canada.