How to claim child care expenses using the T778 form

Raising children while balancing work is both rewarding and expensive. One of the ways the tax system helps support working families is by allowing them to deduct eligible child care expenses—reducing taxable income and easing the financial pressure of paying for care.

To access this deduction, you must complete Form T778, which calculates your eligible child care expenses and determines how much can be claimed on your tax return. While the form may seem technical at first glance, it’s a valuable tool for parents who rely on child care in order to work, attend school, or run a business.

This article explains how the deduction works, which expenses qualify, who can claim them, and how to use the T778 form effectively.

What Are Child Care Expenses?

Child care expenses are costs you paid to have someone look after your child so that you or your spouse could:

• Earn income from employment or self-employment

• Go to school full-time or part-time

• Conduct grant-funded research

These expenses are deducted from your income—not claimed as a tax credit—making them especially valuable. They reduce your net income, which may also affect your eligibility for income-tested benefits like the Canada Child Benefit (CCB) or GST/HST credit.

Who Can Claim Child Care Expenses?

In most families, the lower-income spouse or partner must claim the child care deduction, even if the higher-income spouse paid the bills.

Exceptions apply when the lower-income spouse:

• Was in school

• Had a physical or mental infirmity

• Was incarcerated or not living with the family for valid reasons

In these cases, the higher-income spouse may be allowed to claim the deduction, and the T778 form has a section to explain these exceptions.

What Expenses Qualify?

Eligible child care expenses include payments made to:

• Daycare centres

• Nursery schools

• Nannies or babysitters

• Day camps and summer camps (with some limits)

• Boarding schools or overnight camps (partial claim allowed)

• Educational institutions providing child care services

To qualify:

• The child must have been under 16 years old at some point in the year, unless they have a disability

• The care must allow the parent to work, study, or conduct eligible research

• The caregiver cannot be a relative under age 18 who lives in the same home as the child

You must keep receipts that show:

• The caregiver’s name and SIN (if an individual)

• Amount paid

• Dates of service

• Child’s name

• Service provider’s address (if not an individual)

How Much Can You Claim?

The maximum you can claim depends on the age and condition of the child:

You cannot claim more than two-thirds of your earned income, and the deduction cannot exceed your actual expenses paid.

At Optimize, we help you structure your claims, particularly in households with split incomes or multiple types of care.

How to Complete the T778 Form

Form T778 has several parts, but here’s a simplified guide:

1. Part A: Identify the children for whom expenses are being claimed (name, SIN, birthdate)

2. Part B: List the total child care expenses for each child and who was paid

3. Part C: Calculate the deduction based on the lower-income spouse’s income

4. Part D: Explain if the higher-income spouse is claiming (due to an exception)

5. Part E: Enter the final amount to claim on Line 21400 of your T1 return

You’ll need one form per household—not per child—and should retain all receipts for six years in case CRA requests proof.

Common Scenarios and Considerations

• Both parents working: The lower-income earner claims the deduction

• Single parent household: The sole parent claims the deduction

• Parent in school: The higher-income spouse may claim while the other is enrolled full-time

• Shared custody: Each parent may claim their portion of expenses if supporting the child