Chapter History S1-F3-C1, Child Care Expense Deduction

Introduction

The purpose of this Chapter History page is to highlight any amendments to the information contained in an interpretation bulletin that is now reflected in a chapter of an income tax folio as well as to identify any subsequent amendments to a folio chapter. It outlines amendments that have been made as a result of legislative changes and proposed legislative changes, precedential court decisions, as well as new or revised interpretations of the Canada Revenue Agency (CRA).

Except as otherwise noted, all statutory references herein are references to provisions of the Income Tax Act, R.S.C., 1985, c.1 (5th Supp.), as amended and all references to a Regulation are to the Income Tax Regulations, C.R.C., c. 945, as amended.

Update December 12, 2018

¶1.5 has been updated to include a spouse or common-law partner of a child of the taxpayer as per the extended meaning of "child" in paragraph 252(1)(e).

¶1.30 has been revised to reflect a legislative amendment to clause (i)(B) in the description of variable C in paragraph 63(2)(b) made by S.C. 2017, c. 33, s. 18(1), which permits nurse practitioners to certify that the lower-income supporting individual is incapable of caring for children because of that individual's mental or physical infirmity. This amendment applies to certifications made after September 7, 2017.

¶1.38.1 and 1.38.2 have been revised to refer to the publication of Income Tax Folio S1-F4-C1, Basic Personal and Dependant Tax Credits, which replaced and cancelled Interpretation Bulletin IT513R, Personal Tax Credits.

¶1.49 has been revised to inform readers that the paragraph applies to 2016 and previous tax years due to the repeal of section 118.031 (the children’s arts tax credit) and section 122.8 (the children’s fitness tax credit). These legislative amendments were made by S.C. 2016, c.7, s.15 and s.32 (formerly Bill C-15), effective for the 2017 and subsequent tax years.

Minor revisions have been made to the French version of the Chapter for readability purposes.

Update January 14, 2017

¶1.29 has been revised to remove the reference to the hiring credit for small business and replace it with a reference to the small business job credit (SBJC). This reflects the fact that the hiring credit for small business was discontinued at the end of 2013 and replaced with the SBJC, which is a similar credit.

Update June 21, 2016

¶1.3 has been revised to link readers to the indexation chart on the CRA webpage to see the amounts referred to.

¶1.42 and 1.44 have been revised to remove references to specific tax years so the information is more broad-based.

Update January 5, 2016

¶1.49 has been updated to change the legislative reference for the child fitness tax credit from section 118.03 to section 122.8. This reflects the repeal of section 118.03 (non-refundable child fitness credit) and the enactment of section 122.8 (refundable child fitness credit).  These legislative amendments were made by S.C. 2014, c.39, s.32 and s.39 (formerly Bill C-43), effective for the 2015 and subsequent tax years.

Update November 24, 2015

Minor changes have been made to improve the usability of the income tax folios:

• the Summary section has been moved to the top of each folio chapter to be more immediately visible and helpful to readers;
• the Application and Reference sections have been moved to the end of the Chapter which is more appropriate for administrative content of this nature.  However, these sections now appear in the Table of contents for easy access;
• the statement that folios are only available in electronic format has been moved to the end of the Application section; and
• the words “as promulgated under the Act” in connection with the Income Tax Regulations have been removed from the Application section, in the interest of using plain language.

The following specific changes have been made to this Chapter:

The Summary and ¶1.38 are revised and ¶1.38.1 and 1.38.2 are added to reflect a legislative amendment to the definition annual child care expense amount in subsection 63(3), made by S.C. 2015, c.36 s.29(1) (formerly Bill C-59). The amendment increases each of the dollar limits in the definition by $1,000, effective for the 2015 and subsequent tax years.

¶1.3 is revised to reflect the indexed amount for 2015. 

¶1.42 and 1.44 are revised so that the examples reflect the dollar limit increases in the annual child care expense amount.

Update December 5, 2014

¶1.16 is revised to refer to and reflect the publication of Income Tax Folio S1-F5-C1, Related persons and dealing at arm’s length, which replaced and cancelled Interpretation Bulletin IT-419R2, Meaning of Arm’s Length.

Update November 7, 2014

¶1.35 is revised to refer to and reflect the publication of Income Tax Folio S1-F3-C3, Support Payments, which replaced and cancelled Interpretation Bulletin IT-530R, Support Payments.

Update March 12, 2014

Throughout the French version of the Chapter and its Chapter History, general revisions have been made to improve readability. The following changes have also been made to the Chapter.

¶1.5 of the English version of the Chapter has been modified to reflect the exact wording in paragraph 252(1)(a) of the Act. The word “child” in the first bullet has been replaced with the word “person”.

¶1.7 and ¶1.8 are amended to reflect the legislative amendment made to the definition of common-law partner in paragraph 248(1)(a) by S.C. 2013, c. 34, s. 358(1), effective for 2001 and subsequent tax years.

¶1.30 is amended to reflect the legislative amendment made to clause (i)(B) of the description of C in paragraph 63(2)(b) by S.C. 2013, c. 34, s. 198(1). The amendment requires that medical certifications be in writing, effective for certifications after December 20, 2002.

¶1.41(d) of the French version of the Chapter has been modified to remove the reference to a “bourse d’entretien”. Although the English version of the Act uses two separate expressions for “scholarship” and “bursary”, the French version of the Act uses the general expression “bourse d’études” to describe both concepts. The change has been made to ensure that the French version of the Chapter reflects the wording of the legislation.

¶1.41(e) has been modified by changing the reference to the Department of Human Resources and Skills Development Canada to the Department of Employment and Social Development, to reflect the legislative amendments made by S.C. 2013, c.40 (formerly Bill C-4), s. 237 and 238.

Update March 28, 2013

General

Income Tax Folio S1-F3-C1, Child Care Expense Deduction, replaces and cancels Interpretation Bulletin IT–495R3, Child Care Expenses.

In addition to consolidating the content of the former interpretation bulletin, general revisions have been made to improve readability. Any substantive technical and interpretive changes to the information outlined in the former interpretation bulletin are described below.

Legislative and other changes

¶1.5 and ¶1.7 (formerly ¶8 and ¶9 of IT–495R3, respectively) reflect legislative amendments made to paragraphs 252(1)(a) and (d) by S.C. 2005, c. 33, s.12(1), effective as of July 20, 2005. The amendments replaced the separate references to a person of whom the taxpayer is a legal parent and an adopted child of the taxpayer with a reference to a child of whom the taxpayer is the legal parent.

A definition of the term designated educational institution was previously found in ¶27 of IT–495R3. This paragraph was removed and references to designated educational institution are now linked to the definition of that term in Income Tax Folio S1-F2-C1, Education and Textbook Tax Credits.

¶1.12 is added to address circumstances where fees paid to maintain a place in a day nursery or to ensure babysitting services are retained during a temporary leave of absence from an office or employment may be eligible child care expenses.

¶1.18 (formerly ¶3 of IT–495R3) is revised to clarify the distinction between an educational program and child care.

¶1.19 (formerly ¶29 of IT–495R3) is revised to clarify that the exception in section 64.1 only applies to expenses incurred while the taxpayer is absent from Canada.

¶1.25 (formerly included in the discussion at ¶14 of IT–495R3) is expanded to clarify how income which is exempt from tax under section 81 of the Act is treated in determining whether the taxpayer or the supporting person has the lower income for a year.

¶1.29 (formerly included in the discussion at ¶16 of IT–495R3) was expanded to provide an example of what may be considered assistance for purposes of paragraph 63(1)(d).

¶1.33 to ¶1.36 reflect the discussion formerly found in ¶18 of IT–495R3. The comments are expanded to provide the CRA’s views on situations where a child resides with each parent at different times during the year and one parent pays the child care provider and is reimbursed by the other parent.

¶1.41 (formerly ¶22 of IT–495R3) is revised to reflect a legislative amendment made by S.C. 2007, c.2, s. 8(1) which added a reference to income included in a taxpayer’s income under paragraph 56(1)(n.1) to the definition of earned income in subsection 63(3), effective for the 2007 and subsequent tax years.

¶30 of IT–495R3, which discussed the impact of child care expense deductions on the child tax benefit supplement under subsection 122.61(1), has been removed from the Chapter. The supplement was provided for in paragraph (c) of the description of A in subsection 122.61(1) which was repealed by S.C. 2006, c. 4, s. 177(1), effective in respect of overpayments deemed to arise during months after June 2007.

¶1.49 did not appear in IT–495R3. The child fitness tax credit in section 118.03 was added to the Act by S.C. 2007, c. 2, s. 21(1), effective for the 2007 and later tax years, and the child art tax credit in section 118.031 was added to the Act by S.C. 2011, c. 24, s. 24(1), effective for the 2011 and later tax years. This paragraph was added to the Chapter to highlight the potential impact of a child care expense deduction on the determination of these credits.