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Claiming a tax deduction for child care expenses incurred (April 2026)

While the rules of the Canadian tax system include a great number of tax deduction and credit claims which can be made by individuals, the general rule is that personal living expenses do not, in most cases, qualify for any kind of tax assistance or tax relief. However (and fortunately for parents who must expend significant amounts over the course of a tax year for the cost of day care, after-school care, a babysitter, or even a nanny) an exception is provided from that rule in the form of the child care expenses tax deduction.

That child care expenses tax deduction is particularly beneficial in two ways: first, while there are limits on the amount of child care expenses which can be deducted (and those limits are not indexed to inflation and have not changed since 2014), the limits imposed are still relatively generous ones. Second, and more important, the child care expense deduction enables parents to deduct eligible expenses from income on a dollar-for-dollar basis, meaning that income used to pay eligible child care expenses is income which is not taxed. As well, the rule determining whether child care costs incurred are deductible is fairly straightforward and easy to meet – parents who incur eligible child care costs in order to work (whether in employment or self-employment) or, in some cases to attend school, can deduct those costs from income.

The amount of any available child care deduction to be claimed for the 2025 tax year is calculated on Form T778 E(25), and that calculation can seem forbiddingly complex. However, at the end of the day, the amount of child care expenses which can be deducted is simply the least of three figures, and only one of those figures requires a calculation. The steps involved in determining the amount of available child care expenses deduction are as follows.

First, the amount of any deduction for child care expenses is limited to two-thirds of the taxpayer’s earned income for the year. The income figure used to calculate the two-thirds figure is, generally, the amount shown on Line 23600 of the annual tax return. Where the family incurring child care expenses is a two-income family, it is usually the spouse with the lower net income who must make the claim and consequently it is their net income which is used to provide that two-thirds of net income figure.

The second figure to be determined is the amount actually paid for eligible child care costs during the year. While virtually any licensed child care arrangement will qualify for purposes of the deduction, some more informal arrangements may not. Specifically, no deduction is available for amounts paid to most family members to provide child care. Consequently, it’s not possible for a working spouse to pay the stay-at-home parent to provide child care, nor is it possible to pay an older sibling (or any other related person) who is under the age of 18 to provide such services and to claim a deduction for those expenses incurred. As well, where a claim is made for a deduction for child care expenses on the annual return, the claimant must obtain (and be prepared to provide to the tax authorities) the social insurance number of the individual providing the care as well as a receipt showing the amounts paid, whether to an individual or an organization.

The third figure to be determined is the one which requires some calculation. Basically, the rules governing the deduction of child care expenses impose a maximum deduction per child per year (referred to as the “basic limit”), with that basic limit dependent on the age and health of the particular child.

For 2025, the following overall limits apply:

$5,000 in costs per year for a child who was born in 2009 to 2018;
$8,000 in costs per year for a child who was born after 2018;
$11,000 in costs per year for a child who was born in 2025 or earlier and for whom the disability tax credit can be claimed.

Take, for example, a two-income family in which one spouse earns $70,000 and the second spouse earns $56,000. They have two children, aged 4 (born in 2021) and aged 8 (born in 2017). Neither is disabled. The 4-year-old attends day care five days a week and the 8-year-old goes to an after-school program each weekday.

During 2025, the family incurred $6,000 in day care costs for the younger child and $4,000 in costs for after-school care for the older child.

All eligible child care costs incurred must be claimed by the lower income spouse, who earned $56,000 during 2025. In order to determine the amount which can be claimed for each child, it’s necessary to determine the basic limit for that child, based on their age, as follows.

the basic limit for the 4-year-old (who was born after 2018) is $8,000, and so the entire $6,000 in day care costs incurred can be deducted.
the basic limit for the 8-year-old (who was born between 2009 and 2018) is $5,000, and so once again the entire $4,000 incurred in costs for after-school can be deducted.

Finally, the overall limit for purposes of the child care expense deduction is two-thirds of earned income of the lower-income spouse, meaning that the maximum claim which can be made for 2025 is $37,296 (66.6% of $56,000), well in excess of the actual costs incurred.

The total deduction available for child care expenses incurred for the 2025 tax year will therefore be $10,000. That deduction is claimed on Line 21400 of the tax return filed by the lower-income spouse for the year, reducing their taxable income from $56,000 to $46,000, and resulting in a federal tax savings of $1,450. A similar tax deduction is claimed as well for provincial tax purposes; the amount of provincial tax saved will depend on the tax rates imposed by the province in which the family lives.

Parents wishing to find out more about the child care expense deduction, and perhaps to calculate the maximum deduction which will be available to them for the 2025 tax year, should consult Form T778 E (25). The form is currently on the CRA website and can be found at https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t778.html.

The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.

Making a payment arrangement with the CRA (April 2026)

Very few Canadians look forward to the annual chore of completing and filing their income tax return, and that experience isn’t improved by finding out, once the return is completed, that additional tax amounts are owed to the CRA. Unfortunately, that’s an experience that millions of Canadians will have over the next month or so. While most tax return filings result in payment of a refund to the taxpayer, that’s not always the case. This year, of the returns filed by March 22, 2026, just over a million of those returns resulted in additional tax owed on filing by the individual tax filer. And while that number represents a very small percentage of total returns filed, that’s little consolation for the taxpayers who find themselves in that unhappy position.

Finding out that additional tax amounts are owed usually comes as a surprise to the taxpayer and consequently is almost never something that they have budgeted or planned for. The worst-case scenario, for all taxpayers, is to find out that they are faced with a large tax bill and an imminent payment deadline, and that they just don’t have the funds needed to make the required payment by that deadline. This year, that payment deadline is Thursday April 30, 2026 for ALL individual taxpayers (including self-employed taxpayers and their spouses, notwithstanding the fact that such taxpayers have until Tuesday June 16, 2026 to file their 2025 tax return).

The April 30 payment deadline is inflexible and, where payment in full is not made on or before that date, interest charges on any unpaid balance will be levied by the CRA beginning on May 1, 2026. Interest charges levied by the CRA tend to add up quickly, for two reasons. First, the interest rate charged by the CRA on outstanding tax amounts is, by law, higher than current commercial rates – the rate charged from April 1 to June 30, 2026 is 7.0%. Second, interest charges levied by the CRA are compounded daily, meaning that each day interest is levied on the previous day’s interest charges. It is for these reasons that a taxpayer is, where at all possible, likely better off arranging private borrowing – for example, through a line of credit or low-interest credit card – in order to pay any taxes owing by the April 30, 2026 deadline.

Where the taxpayer can’t pay their tax bill out of current resources and is unable to borrow the funds to do so, there is another option. Like most creditors, the CRA would rather get paid on time and in full, but the Agency’s ultimate goal is to collect the full amount of taxes owed. If a tax bill can’t be paid on time, in full or in part, the CRA is open to making a payment arrangement with the taxpayer, providing them with the option of paying an amount owed over time, plus interest.

There are three options available to taxpayers who want to propose such a payment arrangement. The first is a call to the CRA’s automated TeleArrangement service at 1-866-256-1147. When making such a call, it is necessary for the taxpayer to provide their full name and address, social insurance number, and date of birth, and to have the Notice of Assessment for the last tax return for which the taxpayer filed. For taxpayers who are up to date on their tax filings, that will be the Notice of Assessment for the return for the 2024 tax year. The TeleArrangement Service is available Monday to Friday, from 7 a.m. to 10 p.m., Eastern time.

Taxpayers who would rather speak directly to a CRA employee can call the Agency’s debt management call centre at 1-888-863-8657 from 8 a.m. to 8 p.m. Eastern Time Monday to Friday. Where there is a long wait time, the taxpayer can request that a CRA representative return the call, or can complete an online form (available at https://apps.cra-arc.gc.ca/ebci/iesl/showClickToTalkForm.action) requesting a callback from a CRA agent.

Finally, taxpayers who have registered for the CRA’s online service My Account can also log into their account to schedule a series of pre-authorized debits from their bank account to discharge their tax debt. My Account is available on the CRA website at https://www.canada.ca/en/revenue-agency/services/e-services/cra-login-services.html.

Finally, regardless of the taxpayer’s circumstances, there is one strategy which is in all circumstances the wrong choice. Taxpayers who can’t pay their tax bill by the deadline sometimes conclude that there is no point in filing if payment can’t be made. That’s the wrong decision, and potentially a very costly one. Where an amount of tax is owed and the return isn’t filed on time, there is an immediate late filing penalty imposed equal to 5% of the outstanding tax amount – and interest charges start accruing on that penalty amount (as well as on the outstanding tax balance) immediately. For each full month that the return isn’t filed, a further penalty of 1% of the outstanding tax amount is charged, to a maximum of 12 months. Higher penalty amounts are charged, for a longer period, where the taxpayer has incurred a late-filing penalty within the past three years. In the worst-case scenario, the total penalty charges can reach 50% of the tax amount owed – and that doesn’t count the compound interest which is levied on all penalty amounts, as well as on all unpaid taxes. In all cases, no matter what the circumstances, the right answer is to file one’s tax return on time and, where necessary, contact the CRA to make an arrangement to pay tax amounts owed over time.

Detailed information on the options available to taxpayers who can’t pay their taxes on time and in full can be found on the CRA website at Call us if you can't pay in full or on time - Debt collection at the CRA - Canada.ca and https://www.canada.ca/en/revenue-agency/services/payments-cra/payment-arrangements.html.

Claiming the political contribution tax credit on your 2025 tax return (April 2026)

2025 was a busy year in Canadian politics. In addition to the general federal election, elections were held in two provinces (Ontario and Newfoundland) and two of the territories (Nunavut and Yukon Territory). In addition, there were no fewer than thirteen by-elections and eleven leadership contests, for different political parties, at both the federal and provincial/territorial levels.

Whether it’s a leadership contest, a by-election, or a general election at the federal, provincial, or territorial level, votes are needed in order to win. And to run the leadership or election campaigns needed to garner those votes, candidates need an organization, volunteers, and money – a lot of money. Particularly in a general federal election, the major political parties needed to raise and spend millions of dollars, and the task of raising that money is undoubtedly made somewhat easier by the fact that a tax credit exists to help offset the out-of-pocket cost to potential donors.

Individuals who donated money to the political party or candidate of their choice during 2025 may or may not be happy with the outcome of an election or leadership contest, but no matter which registered party or candidate they donated to, donors may be able to claim a federal and a provincial or territorial tax credit for that donation when they file their returns for the 2025 tax year.

Federally, the political contribution tax credit is available with respect to funds contributed to either a registered political party or to candidates running in a federal election. Contributions can be made at any time, not just during an election campaign, as long as the donation is received by an official candidate or by a registered federal political party or association.

While the parties which currently hold seats in the House of Commons are, of course, the most well known, there were in fact 16 political parties registered and in good standing with Elections Canada at the time of the 2025 federal general election; a listing of those parties can be found on the Elections Canada website at https://www.elections.ca/content.aspx?section=ele&dir=pas/45ge/pollim&document=index&lang=e.

Contributions to any one of these registered parties, within prescribed limits, will qualify for the federal political contribution tax credit. And, where a qualifying contribution is made, an official receipt must be issued in order for the contributor to claim that tax credit.

The federal political contribution tax credit is calculated as a percentage of donations given, with the credit percentage decreasing as contributions amounts increase. The credit percentages allowed for different contribution levels are as follows:

*Contribution amount*	*Allowable tax credit*
$0.01 to $400.00	75 per cent of the contribution
$400.01 to $750.00	$300 plus 50 per cent of the contribution over $400
$750.01 and over	$475 plus 33.33 per cent of the contribution over $750

The maximum credit claimable in any taxation year by a single taxpayer is $650, meaning that the maximum credit obtainable is reached once contribution levels reach $1,275.

Unlike some other tax credit measures, the rules governing the political contribution tax credit do not permit political contributions eligible for the credit to be carried over and claimed in any previous or subsequent tax year. Consequently, all such contributions made can only be claimed on the return for the year in which those contributions were made. As well, where such contributions exceed $1,275 in any one taxation year, no tax credit can be claimed on any “excess” contributions, in either the current or any previous or subsequent tax year.

Each of the provinces and territories also provides a tax credit for political contributions made. The rules on which types of contribution are eligible for that credit, and how the credit is calculated, will differ for each jurisdiction. Information on the political contribution tax credit for the provinces and territories which held general elections in 2025 can be found on the following websites:

Many Canadians who are committed to a particular political party or candidate volunteer their time during a nomination or election campaign – canvassing for the candidate, putting up election signs, or telephoning voters to encourage them to vote for the candidate. However, in such cases, the work must be its own reward, as no income tax receipts can be issued for most such non-monetary contributions, and consequently no credit can be claimed for the value of any non-monetary contribution (including volunteer hours) donated.

Information on the federal political contribution tax credit, as well as the credit claimable in each of the provinces and territories, can be found on the Canada Revenue Agency website at https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/federal-political-contributions-line-40900-total-contributions-line-41000-tax-credit.html, https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/provincial-territorial-tax-credits-individuals.html, and https://www.revenuquebec.ca/en/citizens/income-tax-return/completing-your-income-tax-return/how-to-complete-your-income-tax-return/line-by-line-help/400-to-447-income-tax-and-contributions/line-414/.

How, when, and where to pay your 2025 income taxes (April 2026)

Fortunately for Canadian taxpayers, most individual income tax returns filed with the Canada Revenue Agency result in payment of a tax refund to the taxpayer. Last year, out of nearly 34 million returns filed, just over 19 million resulted in payment of a refund to the taxpayer, with the average refund being $2,000. Just over 8 million taxpayers owed money on filing to the CRA, and the remainder of returns were nil returns, resulting in neither tax owing nor payment of a refund.

The minority of taxpayers who are assessed as having tax owing have a lot of options when it comes to the available methods by which such tax can be paid, but no choice at all when it comes to the deadline by which such payment must be made. In all cases, individual income tax owed by a taxpayer for a tax year must be paid on or before April 30 of the following year. This year, that means any balance of income tax owed for the 2025 tax year must be paid on or before Thursday April 30, 2026. No exceptions and, absent unusual circumstances, no extensions.

Failing to pay one’s tax bill in full and on time can result in a significant financial cost, as the result of the CRA’s practices and policies with respect to interest charges. Interest will be levied on any outstanding amount owed for the 2025 tax year beginning on May 1, 2026. By law, the CRA charges interest at rates which are higher than current commercial rates. For the second quarter of 2026 (April 1 – June 30) the interest rate charged on overdue or insufficient tax amounts owed is 7%, and all such interest charges are compounded daily, meaning that each day interest is charged on interest levied on the previous day.

Just as it’s in the taxpayer’s interest to pay tax amounts owed on or before the April 30 payment deadline, it’s also very much in the CRA’s interest to make paying taxes as simple and straightforward as it can be. To that end, the Agency offers individual taxpayers a wide range of choices when it comes making that payment. This year there are no fewer than eleven separate options available to individual residents of Canada in paying their taxes for the 2025 tax year. The rules and procedures for the methods most frequently used by individual taxpayers are outlined below: the first four options involve payment by electronic means, while the last three describe those available to taxpayers who would prefer to make their payments in person, or by sending a cheque to the CRA.

Pay using online banking

Millions of Canadians transact most or all of their banking using the online services of their particular financial institution. The list of financial institutions through which a payment can be made to the Canada Revenue Agency is a lengthy one (available at Pay online with your bank or credit union - Payments to the CRA - Canada.ca), and includes all of Canada’s major banks and credit unions.

The specific steps involved in making that payment will differ slightly for each financial institution, depending on how their online payment systems are configured. What’s important to remember is that the nature of the payment – i.e., tax balance owed on filing, as distinct from current year tax instalment payments – must be specified, and the taxpayer’s social insurance number must be provided, in order to ensure that the payment is credited to the correct account, for the correct taxation year.

It’s not necessary to access any particular CRA form in order to make an online payment of taxes through one’s financial institution.

Using the CRA’s My Payment

The CRA also provides an online payment service called My Payment. There is no fee charged for the service, and it’s not necessary to be registered for any of the CRA’s other online services in order to use My Payment.

What is necessary is that the taxpayer have an activated debit card with a VISA Debit or Debit MasterCard logo from a participating Canadian financial institution, as My Payment is set up to accept payment using only those cards. It’s not possible to use a credit card to make a payment on My Payment; in addition, cards bearing only the Interac Debit logo, which were formerly eligible, have not been accepted for purposes of My Payment since September 2024.

Anyone intending to use My Payment should also confirm that the amount of any payment to be made is within any transaction limits imposed by their particular financial institution.

A list of participating financial institutions for each type of card, and more details on this payment method, can be found at https://www.canada.ca/en/revenue-agency/services/e-services/payment-save-time-pay-online.html.

Payment by credit card, PayPal, or Interac e-transfer

While it’s possible to pay one’s taxes using a credit card, PayPal, or Interac e-transfer, such payments can be made only through third-party service providers (that is, payments by those methods cannot be made directly to the Canada Revenue Agency), and such third-party service providers will impose a fee for the service.

There are currently only three service providers through which individual income tax amounts owed can be paid – Pay Simply, Plastique, and TelPay – and each such service provider offers different payment methods. Links to each such service are available at https://www.canada.ca/en/revenue-agency/services/about-canada-revenue-agency-cra/pay-credit-card.html.

Payment by pre-authorized debit

It’s possible to set up a pre-authorized debit (PAD) arrangement with the CRA, authorizing the Agency to debit a specific bank account for an amount of taxes owed, on dates specified by the taxpayer.

Individuals who make instalment payments of tax throughout the year may already have such an arrangement in place and can certainly use that existing arrangement to schedule a PAD of any balance of taxes owed for the 2025 tax year. However, any such payments must be scheduled at least five business days before the date the payment is to be made – i.e., April 30, 2026. A taxpayer who makes a payment of taxes only once a year is likely better off using another of the available payment methods.

There is also another option for taxpayers who have their return prepared and E-FILED by an authorized electronic filer. Such taxpayers can have that E-FILER set up a PAD agreement on their behalf in order to make a “one-time” payment for a current year tax amount owed. Such an arrangement is only for the payment of a current year tax balance and can’t be used for other payments like instalment payments of tax. Details on how to set up a pre-authorized debit arrangement, whether for a single payment or for recurring payments, are outlined on the CRA website at https://www.canada.ca/en/revenue-agency/services/about-canada-revenue-agency-cra/pay-authorized-debit.html.

Paying in person at your financial institution

For those who don’t use online banking, or simply prefer to make a payment in person, it’s possible to pay a tax amount owed at a bank or credit union. Doing so, however, requires that the taxpayer have a specific remittance form – the T7DR, Amount owing Remittance Voucher.

It’s possible to download and print that remittance form from the CRA website. Instructions on how to do so can be found on the website at https://www.canada.ca/en/revenue-agency/services/forms-publications/request-payment-forms-remittance-vouchers.html.

Paying at a Canada Post outlet

All Canada Post outlets can receive payments of individual income tax balances owed, in cash or by debit card, but will charge a fee for doing so. A specific form is needed to make tax payments at Canada Post outlets.

For such payments, the taxpayer must have a QR code which contains the information needed for the CRA to credit the amount paid to the taxpayer’s account.

While a QR code is sometimes included on remittance forms sent to the taxpayer by the CRA, it’s also possible to generate a QR code online through the CRA website. A link to instructions on how to do so can be found on that website at https://www.canada.ca/en/revenue-agency/corporate/about-canada-revenue-agency-cra/pay-canada-post.html.

Paying by cheque

While it’s not as common anymore, it’s still possible to pay any tax balance owed on filing by cheque, as outlined on the CRA website at https://www.canada.ca/en/revenue-agency/services/about-canada-revenue-agency-cra/pay-cheque.html.

Such cheques are made payable to the Receiver-General for Canada and are mailed, together with the required remittance voucher, to the Canada Revenue Agency, using the address found on the CRA website. As is the case with payments made at a financial institution, the taxpayer can print such a remittance form from the CRA’s website. Instructions on how to do so can be found at https://www.canada.ca/en/revenue-agency/services/forms-publications/request-payment-forms-remittance-vouchers.html.

Even where the taxpayer does not have a remittance form, it’s possible to pay taxes owed by cheque. The CRA suggests that, where payment of taxes owed is made by cheque, the taxpayer should include their social insurance number on the memo line found on the front of the cheque and, in addition, provide information about the tax account (that is, 2025 income tax balance owed on filing) to which the payment should be applied. Alternatively, that information can be provided on a separate piece of paper sent in the same envelope as the cheque. Taking these steps will help ensure that the payment is credited to both the correct taxpayer and the correct tax account of that taxpayer.

A decision on what method to use to pay one’s taxes includes another very important consideration of which most taxpayers are unaware. Under longstanding Canada Revenue Agency policy, the CRA considers that a payment is actually made on the date on which it is received by the Agency. However, depending on the payment method chosen, that date of receipt usually isn’t the same day the payment is made by the taxpayer, and it can be as much as several days later. And, of course, where payment is made close to the payment deadline, that delay can mean the difference between a timely payment and one that is late and incurs interest charges.

Helpfully, the Canada Revenue Agency provides information, for each payment method, on both which types of tax payments can be made using that method and how the date of receipt is determined for that particular method. That information can be found on the CRA’s website at Canada Revenue Agency https://www.canada.ca/en/revenue-agency/services/payments-cra/individual-payments/make-payment.html.

Finally, once payment has been made, by any payment method, the CRA provides taxpayers with an online method for confirming that a payment has been received and applied to the taxpayer’s account, through the Agency’s My Account service. That service is available at https://www.canada.ca/en/revenue-agency/services/payments-cra/confirm-payment.html. Taxpayers who have not signed up for My Account can confirm that their payment has been received and applied to their 2025 tax account by calling the CRA’s Individual Income Tax Enquiries line, where an automated service at 1-800-959-8281, option 4, can provide that information.

New Quarterly Newsletters (Q2 2026)

Two quarterly newsletters have been added – one dealing with personal issues, and one dealing with corporate issues.