9 November 1999 External T.I. 9928395 - CHILD CARE EXPENSES

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues: Whether child care expenses can be claimed by a non-custodial parent

Position: No

Reasons: See 982344. In the case where two parents are divorced and only one parent is the custodial parent, child care expenses for the year will be allowed only to the individual who resided with the child at the time the child care expense was incurred and only to the extent that they were paid by that individual to enable the individual to engage in the activities listed in paragraph 1 of IT-495R2, Child Care Expenses. If the non-custodial parent pays the child care expenses, the non-custodial parent is not entitled to deduct the child care expenses. As a general rule, when there is no longer a "supporting person" (as defined in subsection 63(3) of the Income Tax Act), the individual claiming the child care expense deduction must have paid the child care expenses and must have resided with the child at the time the child care expenses were incurred.

XXXXXXXXXX 992839
G. Moore
November 9, 1999

Dear XXXXXXXXXX:

Re: Child Care Expenses

We are replying to your letter of October 18, 1999, regarding child care expenses.

You describe a situation in which an individual was previously married and has two children from his first marriage. The children reside with their mother. The individual pays child support in accordance with the new guidelines and is not entitled to claim a deduction in respect of his child support payments. The individual also pays extra for child care expenses over and above the child support to the mother of the children. You are asking if the individual is entitled to claim the percentage (60%) of child care expenses in respect of which he made payments to the children's mother. You are also asking if the custodial parent (i.e., the mother) is the only parent who can claim child care expenses. It is your view that since the individual reimburses the mother of the children for 60% of the child care expenses she incurs that the individual should be entitled to claim 60% of the child care expense deduction on his income tax return.

Our Comments

In the case where two parents are divorced and only one parent is the custodial parent, child care expenses for the year will be allowed only to the individual who resided with the child at the time the child care expense was incurred and only to the extent that they were paid by that individual to enable the individual to engage in the activities listed in paragraph 1 of IT-495R2, Child Care Expenses, (copy enclosed). In the situation you described in your letter, it appears that only the individual's ex-spouse would be entitled to claim child care expenses since she would be the parent residing with the children at the time the child care expenses were incurred and assuming that she paid for the child care expenses to enable her to engage in the activities listed in paragraph 1 of IT-495R2.

If the non-custodial parent pays the child care expenses, the non-custodial parent is not entitled to deduct the child care expenses. As a general rule, when there is no longer a "supporting person" (as described in paragraph 8 of IT-495R2), the individual claiming the child care expense deduction must have paid the child care expenses and must have resided with the child at the time the child care expenses were incurred. Different rules apply if the couple separates during a year and resume living together within the first 60 days of the following year.

The receipt for child care expenses should be made to the individual who paid the child care expenses. If the non-custodial parent paid the child care expenses, the receipt should be made to him or her and would not be deductible to the non-custodial parent. In addition, the custodial parent would not be entitled to deduct child care expenses paid by the non-custodial parent.

In the case of shared custody, since each parent resides with the child, and assuming that neither are residing with a "supporting person" during the year, each parent could claim child care expenses incurred in a taxation year for an eligible child if the expenses were incurred by the parent at the time the parent resided with the child and only to the extent that they were paid by that parent to enable the parent to engage in the activities listed in paragraph 1 of IT-495R2.

We trust our comments will be of assistance to you.

Yours truly,

J. Wilson.

for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

Encl:

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