There are various Canada Revenue Agency (CRA) tax forms you can use to claim deductions that reduce your taxable income and save more on taxes. The T778 is one such form. This guide walks through what form T778 is, who can claim child care expenses, which payments qualify, and how much you can deduct, plus answers to common questions so you can claim with confidence.
What is form T778?
Form T778 is the CRA form used to claim the child care expense deduction, which lowers your taxable income if you paid for care for a child. It's a deduction, which means it lowers your taxable income — the amount your tax is calculated on — rather than reducing your tax bill directly the way a credit does.
You can use the T778 if you paid for care for an eligible child so that you (or your spouse or common-law partner) could work, study, or run a business. An eligible child is generally your child, your partner's child, or a child who depended on you — usually one under 16. The form features four main parts, described below.
Part A – total child care expenses
This is where you enter the total child care expenses you incurred during the tax year you're claiming for. You can enter the first name, last name, and birth date of each eligible child, along with the expenses paid.
You also record the name of the child care organization, or the name and social insurance number (SIN) of the individual who received the payments. Other entries include the number of weeks spent in boarding schools and overnight camps, plus a separate line for total expenses paid on eligible children 6 years or younger at the end of the tax year.
Part B – basic limit for child care expenses
If you live with another person, such as a spouse or common-law partner, the lower net income earner must claim the child care expense deduction, except in certain circumstances (see Parts C and D below). If you're the lower net income earner and none of those circumstances apply, Part B is where your allowable deduction is calculated.
Enter the number of children that fall into each of the three basic limit amounts. These amounts differ depending on each child's age and whether the disability amount can be claimed for them, or whether they have an impairment but can't claim the disability amount.
The total basic limit is then tallied. The amount of the deduction is the lesser of the total basic limit, the total of your child care expenses, and two-thirds of your earned income.
Part C – person with the higher net income
As the title suggests, this section is for the person with the higher net income. It applies only in specific cases the CRA recognizes as eligible for the higher net income person to claim the deduction.
These cases include when the lower net income partner was enrolled in school, physically or mentally impaired, or imprisoned. They also include being apart due to a breakdown in your relationship for at least 90 days in the tax year, provided you reconciled before March 2 of the following year.
Part D – for those enrolled in an educational program
This section is reserved for two specific situations. The first is if you are the only person paying for the eligible child and were enrolled in an educational program in the same year.
The second is if you are the person with the higher net income and both you and another person were enrolled in an educational program. Part D doesn't apply to the person with the lower net income, and the higher net income person must also complete Part C before Part D.
Who can claim child care expenses?
Only eligible persons can claim T778 deductions. Generally, that's someone who paid for child care so they (or their spouse or common-law partner) could work, study, or run a business — for a child under 16 who lived with them. If you are the only one making payments for the child, you fill out Parts A, B, and, if applicable, D.
If you live with another person, they can claim the deductions if they are the eligible child's parent. They can also claim deductions if they are your spouse or common-law partner, but only if you are the child's father or mother, and they must be the lower net income earner. An individual claiming deductions for the eligible child on lines 30400, 30425, 30450, or 30500 of their return can also fill out the T778.
Essentially, if you support an eligible child below 16 years of age, you can fill out form T778 to report the total expenses spent. The form is typically completed by the person with the lower net income, though the CRA recognizes circumstances where the person with the higher net income can claim the expenses.
When can the higher-income partner claim the deduction?
In most households, the person with the lower net income has to claim the deduction. The CRA allows the person with the higher net income to claim it only in specific situations, which you report in Part C or Part D of the form.
The higher earner can claim the expenses when, during the year, the lower-income person was:
Enrolled in an educational program at a school or eligible institution
Unable to care for the child because of a physical or mental impairment
Confined to a bed or wheelchair, or a patient in a hospital or similar facility, for at least 2 weeks
In prison or a similar institution for at least 2 weeks
Living apart from you at the end of the year because of a breakdown in your relationship that lasted at least 90 days, provided you reconciled within the first 60 days of the following year
When one of these situations applies, the higher-income person calculates their claim first, and each partner fills out a separate form.
What payments can you claim?
Taxpayers supporting eligible children can claim payments made to the following:
Caregivers — individuals providing child care services
Day care centres and day nursery schools — licensed and unlicensed care facilities
Day camps and day sports schools — where the primary goal is caring for the children, which excludes institutions with sports study programs
Overnight sports schools and camps — programs that include lodging
Boarding schools — the child care portion of the fees
Educational institutions such as private schools — only the tuition portion related to child care services is reported
What payments can't you claim?
Form T778 isn't designed for some expenses, which may be covered by other tax deduction slips. You cannot claim payments made toward the following:
Clothing, transportation, and medical or hospital care — everyday and care costs that aren't child care
Regular program tuition and sports study programs — fees related to standard educational costs at an educational institution
Leisure and recreational activities — such as annual scout registration and tennis lessons
The form also doesn't allow you to claim child care expenses that have been reimbursed, are entitled to be reimbursed, or are other benefits excluded from your income.
When you file for a person who passed away during the tax year, you can claim child care expenses for them as if they were the only person supporting the child, even if they lived with another person. In their absence, the other person can also claim the child care expenses paid while living with the child as if they were the only person supporting the child, so long as the expenses haven't already been claimed by someone else.
The T778 can be a little complicated, but tax preparation software can walk you through it with a series of questions. You can also work with an experienced tax advisor to help you claim the deductions you're entitled to.
How much can you claim?
The amount you can deduct is the lowest of three figures: the total basic limit for your children, the child care expenses you actually paid, and two-thirds of your earned income.
The basic limit depends on each child's age and situation:
Child's situation | Basic limit |
|---|---|
| Each child under 7 at the end of the year | $8,000 |
| Each child aged 7 to 16, or an older child with an impairment who doesn't qualify for the disability amount | $5,000 |
| Each child who qualifies for the disability amount, at any age | $11,000 |
Once you calculate your allowable amount, you report it on line 21400 of your tax return.
