Income Tax Interpretation Bulletin

Child Care Expenses

NO.: IT-495R3

DATE: May 11, 2005

SUBJECT: INCOME TAX ACT
Child Care Expenses

REFERENCE:  Section 63 (also sections 6, 7, 64.1, 118, 118.3 and 122.6; subsections 81(4), 118(1), 118.2(2), 118.3(1), 118.6(1), 122.61(1), 220(2.1), and 251(6); the meaning of common-law partner in subsection 248(1) and the extended meaning of child in subsection 252(1); and paragraphs 3(f), 56(1)(n), 56(1)(o), 56(1)(r), 60(v.1), 60(w), 81(1)(a), 118(1)(c), 251(2)(a) and 252(2)(a) of the Income Tax Act).

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Contents

• Application
• Summary
• Discussion and Interpretation
  • Explanation of expressions used
    • Child care expense (¶s 1-2)
    • Educational institution (¶ 3)
    • Day sports school (¶ 4)
    • Excluded child care expenses (¶ 5)
    • Eligible child care provider (¶ 6)
    • Eligible child (¶ 7)
    • Extended meaning of child (¶ 8)
    • Spouse and common-law partner (¶ 9)
    • Supporting person (¶ 10)
    • Annual child care expense amount (¶ 11)
    • Periodic child care expense amount (¶ 12)
  • Who may claim the deduction
    • General rule (¶ 13)
      • Income (¶s 14-15)
      • Payer of child care expenses (¶ 16)
    • Higher income taxpayer (¶ 17)
      • Separation and shared custody (¶ 18)
    • Students (¶ 19)
      • Full-time and part-time programs (¶ 20)
  • Maximum deduction
    • General rule (¶ 21)
      • Earned income (¶s 22-23)
    • Deductibility of child care expenses by the higher income taxpayer (¶s 24-25)
    • Child care expenses while at school (¶ 26)
      • Designated educational institution (¶ 27)
  • Form T778 and receipts (¶ 28)
  • Other situations (¶ 29)
  • Impact of child care expense claims
    • Child tax benefit supplement (¶ 30)
    • Disability tax credit supplement (¶ 31)
• Explanation of Changes

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Application

This bulletin cancels and replaces Interpretation Bulletin IT-495R2, Child Care Expenses, dated January 13, 1997. The comments in this bulletin apply to the 2001 and subsequent taxation years. Unless otherwise stated, all statutory references throughout the bulletin are to the Income Tax Act (the Act). All terms in bold are defined in the Act and explained in this IT.

Please note that this bulletin does not reflect Bill C-38, an Act respecting certain aspects of legal capacity for marriage for civil purposes, tabled on February 1, 2005.

Summary

The purpose of the legislative provisions regarding child care expenses is to provide some relief for taxpayers who incur child care expenses in order to work, carry on a business or undertake certain educational activities.

A taxpayer is allowed to deduct in computing income for a taxation year an amount paid as or on account of child care expenses incurred for services rendered in the year. The deduction is limited to:

• a maximum of $10,000 per year for each eligible child in respect of whom the taxpayer may claim the disability tax credit for the year;
  
  
• a maximum of $7,000 per year for each other eligible child who is under 7 years of age at the end of the year; and
  
  
• a maximum of $4,000 per year for each other eligible child.

Depending upon the circumstances, qualifying child care expenses may be deducted by the taxpayer making the payment, by a supporting person or by both. Payments do not qualify as child care expenses if they are made to a parent or supporting person of the child, or to a person who is under 18 years of age and related to the taxpayer.

The bulletin discusses the meaning of child care expenses including the circumstances under which such expenses may be deducted. It comments on certain specific types of expenses and whether or not they qualify for deduction. It also discusses who is eligible to claim child care expenses and the limitations with respect to such claims. Examples are provided for lower and higher income taxpayers.

Discussion and Interpretation

Explanation of expressions used

Child care expense

¶ 1. The term child care expense is defined in subsection 63(3). Child care expense means an expense incurred for services rendered in a taxation year for the purpose of providing child care services for any eligible child (see ¶ 7) of a taxpayer if the services were provided to enable the taxpayer or a supporting person (see ¶ 10) of the child for the year:

• to perform the duties of an office or employment;
  
  
• to carry on a business either alone or as a partner actively engaged in the business;
  
  
• to carry on research or any similar work for which the taxpayer or supporting person received a grant; or
  
  
• to attend a secondary school or designated educational institution where the taxpayer is enrolled in a full-time or part-time educational program (see ¶ 20).

The taxpayer or supporting person must have resided with the child at the time the expense was incurred in order for the expense to qualify as a child care expense.

¶ 2. Child care expenses include payments to:

• an eligible child care provider (see ¶ 6);
  
  
• a day nursery school or day-care centre;
  
  
• a day camp or day sports school (see ¶ 4);
  
  
• a boarding school or camp (including a sports school where lodging is involved); and
  
  
• an educational institution (see ¶ 3) for the purpose of providing child care services.

The above is not an exhaustive list of deductible child care expenses. For example, advertising expenses and placement agency fees incurred to locate a child care provider and mandatory registration fees may also qualify as child care expenses. In each case, the requirements in the definition of child care expense in subsection 63(3), as explained in ¶s 1, 5 and 6, must also be met.

Educational institution

¶ 3. When an educational institution offers child care as well as an educational program, only the portion of the fees paid to the institution relating to child care (i.e., supervision before and after classes or during the lunch period) may qualify as child care expenses. However, when the payment made is for a child under the compulsory school age, the services being provided are generally considered child care rather than education unless the facts indicate otherwise.

Day sports school

¶ 4. The term day sports school is intended to cover those day camps providing a sufficient degree of child care services. Where a child participates in a particular program that includes sports, there can be an element of education and perhaps training as well as an element of child care. However, in any particular case, it is a question of fact as to whether child care services can be regarded as having been provided or whether a program of training and/or education is essentially involved. With respect to any particular program, a degree of basic protection and safety (child care services) is normally involved although the program may also provide activities and instruction which enrich the program. In determining whether a particular sports program involves a sufficient degree of child care, some factors that would be considered are the age of the participating children, the instructors' qualifications, the extent that progress is measured and goal-orientation is involved, the time devoted to the program, the duration of the program and the training and educational facilities used. For example, sports day camps for young children are generally not of an ongoing nature and it is generally recognized that there is a sufficient degree of child care even though the program is enriched by sporting activities with instruction. On the other hand, children, particularly those who are older, may participate in a sports program that is ongoing for a lengthy period of time, the instructors have degrees or certificates in respect of physical education, progress is regularly monitored and is goal-oriented, and sophisticated training methods and facilities are used. In this type of scenario, it is our general view that education and training are essentially involved as opposed to child care.

Excluded child care expenses

¶ 5. Specifically excluded from the definition of child care expense are:

• medical expenses described in subsection 118.2(2) (see the current version of IT-519, Medical Expense and Disability Tax Credits and Attendant Care Expense Deduction) and any other expenses for medical or hospital care;
  
  
• clothing, transportation or education costs; and
  
  
• board and lodging expenses, except to the extent they are included in the total charges for attendance at an overnight sports school or a boarding school or camp and those total charges do not exceed the product obtained when multiplying the periodic child care expense amount (see ¶ 12) in respect of the child for the year by the number of weeks during which the child attended the school or camp.

Note that the cost of meals is not disqualified when it is included in the cost of babysitting, day nursery or day camp services.

Eligible child care provider

¶ 6. Subject to the exceptions outlined in ¶ 29, for an expense in respect of child care services to qualify as a child care expense, the services must be provided by a resident of Canada. Where the child care services are provided by an individual, the individual must be a person other than:

• the child's father or mother;
  
  
• a supporting person of the child;
  
  
• a person in respect of whom the taxpayer or a supporting person of the child has deducted a tax credit under section 118 for the year; or
  
  
• a person who is under 18 years of age and related to the taxpayer.

Paragraph 251(2)(a) provides that individuals are related if they are connected by blood relationship, marriage, common-law partnership or adoption. Subsection 251(6) defines a connection by blood relationship, marriage, common-law partnership or adoption for the purposes of the Act. For example, a brother-in-law or sister-in-law of the taxpayer is related to the taxpayer under subsection 251(6). However, a niece, nephew, aunt, or uncle is generally not related to the taxpayer. For further information on the criteria used to determine whether or not persons deal with each other at arm's length under the Act see the current version of IT-419, Meaning of Arm's Length.

Eligible child

¶ 7. An eligible child of a taxpayer for a taxation year is defined in subsection 63(3) to mean:

• a child of the taxpayer or of the taxpayer's spouse or common-law partner (see ¶s 8 and 9); or
  
  
• a child dependent on the taxpayer or the taxpayer's spouse or common-law partner for support and whose income for the year does not exceed the basic personal amount for the year as provided in paragraph (c) of the description of B in subsection 118(1).

The child has to be under 16 years of age at some time in the year. However, the age limit does not apply if, during the year, the child is dependent on the taxpayer or on the taxpayer's spouse or common-law partner and has a mental or physical infirmity.

Extended meaning of child

¶ 8. Subsection 252(1) provides an extended meaning of the term “child” for the purposes of the Act. Under this subsection, a child of a taxpayer includes:

• a natural child of the taxpayer;
  
  
• a person who is wholly dependent on the taxpayer for support and of whom the taxpayer has, or immediately before the person attained the age of 19 years had, in law or in fact, the custody and control;
  
  
• a child of the taxpayer's spouse or common-law partner; and
  
  
• an adopted child of the taxpayer.

Spouse and common-law partner

¶ 9. The term spouse now refers exclusively to a person who is legally married to the taxpayer. The term common-law partner in respect of a taxpayer is defined in subsection 248(1) and at a particular time includes:

Under the definition of common-law partner, once a taxpayer and another individual have cohabited in a conjugal relationship, they will be deemed to cohabit in a conjugal relationship at any future particular time unless, because of a breakdown of their conjugal relationship, they were living separate and apart at that particular time and for a period of at least 90 days that includes that time.

Note: However, draft amendments were released in February 2004, to paragraph (a) of the definition of common-law partner in subsection 248(1). If enacted as proposed, for the 2001 and subsequent taxation years, to qualify as common-law partners at a particular time under (a) above, the two individuals must have cohabited in a conjugal relationship throughout the twelve month period that ends at that particular time.

Supporting person

¶ 10. A supporting person of an eligible child of a taxpayer for a taxation year is defined in subsection 63(3) to mean an individual who resided with the taxpayer at any time during the year and at any time within 60 days after the end of the year and who is:

• the child's parent (paragraph 252(2)(a) provides an extended meaning of parent for the purposes of the Act);
  
  
• the taxpayer's spouse or common-law partner; or
  
  
• any other individual who claimed a tax credit under section 118 for the child for the year.

Annual child care expense amount

¶ 11. The annual child care expense amount is defined in subsection 63(3) and sets out the overall maximum amount that a taxpayer can deduct for a year in respect of the taxpayer's eligible child (see ¶ 7). The child's age, physical and mental condition will determine the maximum amount to be deducted.

For a child in respect of whom a disability tax credit may not be claimed

In this case, the annual child care expense amount is:

• $7,000 for each child under 7 years of age at the end of the year;
  
  
• $4,000 for each child over 6 years of age at the end of the year and under 16 years of age at any time during the year; or
  
  
• $4,000 for each child over 15 years of age throughout the year who has a physical or mental infirmity and is dependent on the taxpayer, the taxpayer's spouse or common-law partner (see the current version of IT-513, Personal Tax Credits, for more information).

For a child in respect of whom a disability tax credit may be claimed

When the credit can be claimed for the year under section 118.3 for a child with a severe and prolonged mental or physical impairment, the annual child care expense amount is $10,000 (see ¶ 31 for a discussion of the potential impact of a child care expense claim on the entitlement to a disability tax credit supplement). See the current version of IT-519, Medical Expense and Disability Tax Credits and Attendant Care Expense Deduction for more information.

Periodic child care expense amount

¶ 12. The periodic child care expense amount as defined in subsection 63(3) is 1/40 of the annual child care expense amount (see ¶ 11) in respect of an eligible child of the taxpayer for the year. The total periodic child care expense amounts is 1/40 of the sum of the annual child care expense amounts in respect of all eligible children of the taxpayer for the year.

Who may claim the deduction

General rule

¶ 13. Subsection 63(1) provides that an amount paid as or on account of child care expenses incurred for services rendered in a taxation year for an eligible child may be deducted:

An amount paid as or on account of child care expenses incurred for services rendered in a taxation year for an eligible child may be deducted by the taxpayer with the higher income or partly by both that taxpayer and the supporting person under certain circumstances (see ¶ 17). For further information on the calculation of child care expenses and examples, see ¶s 21-23 for the general rule and ¶s 24-25 for the higher income taxpayer.

Income

¶ 14. In determining whether the taxpayer or the supporting person had the lower income for the year, subsection 63(2) provides that the calculation of incomes is to be done without reference to any otherwise allowable deductions for:

• child care expenses under section 63;
  
  
• any benefit repayment payable under Part VII of the Employment Insurance Act on or before April 30 of the following year and which is deductible for the taxation year under paragraph 60(v.1); or
  
  
• the amount of old age security benefits that is required to be repaid for the year as tax under Part I.2 as provided by paragraph 60(w).

Paragraph 3(f) provides that a taxpayer with no income for a year is deemed to have income of an amount equal to zero.

¶ 15. Subsection 63(2.1) applies when the income for the year of a taxpayer who has an eligible child and the income of a supporting person of the child are equal when calculated in the manner described in ¶ 14. In such cases, subsection 63(2.1) provides that no child care expense deduction will be allowed to either the taxpayer or to the supporting person unless they jointly elect to treat the income of one of them as exceeding the income of the other for the year. The election can be made by having either the taxpayer or the supporting person, but not both, claim the deduction. A claim for the child care expense deduction is made by filing Form T778, Child Care Expenses Deduction (see ¶ 28).

Payer of child care expenses

¶ 16. Subject to the comments in ¶ 18, there is generally no requirement that the individual who claims child care expenses must have personally paid those expenses provided there is both a taxpayer and a supporting person for the year and the expenses were paid by either of these individuals. However, when there is no supporting person for the year, the taxpayer claiming child care expenses must have paid those expenses. Under paragraph 63(1)(d), no deduction may be claimed for child care expenses for which any taxpayer is or was entitled to a reimbursement or any other form of assistance unless the reimbursement or assistance is included in a taxpayer's income and is not deductible in computing that taxpayer's taxable income.

Higher income taxpayer

¶ 17. By virtue of subsection 63(2), the taxpayer with the higher income will be allowed to deduct child care expenses under subsection 63(1) (see ¶s 24-25) during the period that the supporting person with the lower income was:

If any of the situations described in (a) to (d) above applies, see ¶ 24 to determine the maximum amount that the taxpayer with the higher income may deduct for child care expenses for a year.

Draft amendments to the Act were released in February 2004. If enacted as proposed, after December 20, 2002, the medical doctor's certification described at ¶ 17(b) will have to be in writing.

Separation and shared custody

¶ 18. If the reconciliation referred to in ¶ 17(d) does not occur, the requirement in ¶ 10 will not be met with the result that there will not be a supporting person for the year of separation. In this case, child care expenses for the year of separation will be allowed only to the individual who resided with the child and only to the extent that they were paid by that individual to enable the individual to engage in one of the activities listed in ¶ 1. When there is no qualifying reconciliation and the child lived with each parent at different times in a year (e.g. shared custody situations), both taxpayers may claim a deduction for the year as provided in ¶ 21 with no reduction for the amount claimed by the other taxpayer. In these cases, the CRA will generally consider each parent to reside with a child while the child is in their custody. Assuming that neither parent is residing with a supporting person during the year, each parent could claim child care expenses incurred in a taxation year for an eligible child for the expenses incurred by the parent for a period during which the child resided with the parent and only to the extent that they were paid by that parent (see ¶ 16) to be enabled to engage in the activities listed in ¶ 1. However, if the parent remarries or enters into a common-law relationship with another person such that the other person is a supporting person as described in ¶ 10, the new supporting person may be the one entitled to deduct child care expenses.

Students

¶ 19. Under subsection 63(2.2), a taxpayer may be entitled to deduct an additional amount of child care expenses for eligible children for periods during which the taxpayer was a student enrolled in a full-time or part-time program (see ¶ 20). However, as determined under subsection 63(2.3), if there is a supporting person that person must also be a student at the same time as the taxpayer, and the taxpayer must have the higher income for the year (computed as described in ¶ 14) to claim the additional amount of child care expenses under subsection 63(2.2). In each case, the student or students must be in attendance at a designated educational institution or secondary school (see ¶ 27). The deduction will vary depending on whether the program is full-time or part-time. See ¶s 26-27 for further information on the calculation of child care expenses for students.

Full-time and part-time programs

¶ 20. A full-time program is one that has to last at least 3 consecutive weeks and requires that each student in the program spend at least 10 hours per week on courses or work in the program. A part-time program is one that also has to last at least 3 consecutive weeks and requires that each student in the program spend at least 12 hours per month on courses.

Maximum deduction

General rule

¶ 21. A taxpayer may claim less than the maximum amount allowed under subsection 63(1) when it is advantageous for the taxpayer to do so (see ¶s 30-31). It is not possible, however, to carry forward unclaimed expenses to a subsequent taxation year. The deduction available under subsection 63(1) is limited to a maximum of $10,000, $7,000 or $4,000 per eligible child, depending on the circumstances. An amount is not deductible by the taxpayer if it is included in computing deductible child care expenses for someone else.

As noted in ¶ 13(a), (b) and ¶ 16, child care expenses may be deducted by:

• the taxpayer when there is no supporting person; or
  
  
• the taxpayer with the lower income when there is a taxpayer and a supporting person and the circumstances described in ¶ 17(a) to (c) do not apply.

In either of these cases, the amount deductible by a taxpayer in any particular year is limited to the least of A and B.

A is the amount paid by the taxpayer or supporting person as or on account of child care expenses (see ¶s 1-6) incurred for services rendered in the year, and that is not already included as an amount deductible under subsection 63(1) by an individual other than the taxpayer. However, pursuant to paragraph 63(1)(d), no deduction may be claimed for child care expenses for which any taxpayer is or was entitled to a reimbursement or any other form of assistance unless the reimbursement or assistance is included in a taxpayer's income and is not deductible in computing that taxpayer's taxable income.

B is the amount, if any, by which the lesser of

The amount deductible by the taxpayer or supporting person with the higher income may be further limited as explained in ¶s 24-25.

Earned income

¶ 22. As indicated in ¶ 21 under the general rule, a taxpayer's claim for child care expenses for a year cannot exceed two-thirds of the taxpayer's earned income for that year. Earned income of a taxpayer for the purposes of the child care expense deduction is defined in subsection 63(3). Earned income consists of:

The amounts described in (b) to (f) above are to be taken into account in calculating a taxpayer's earned income even though these amounts, by reason of paragraph 81(1)(a) (statutory exemptions) or subsection 81(4) (payments for volunteer services), may not be required to be included in income.

Deductibility of child care expenses by the higher income taxpayer

¶ 24. When an amount paid as or on account of child care expenses is deductible by the taxpayer with the higher income or partly by both that taxpayer and the supporting person, the amount deductible by the higher income taxpayer under subsection 63(1) is limited to the lesser of:

• the amount computed under paragraph 63(2)(a) (which is the amount that would otherwise be deductible by the higher income taxpayer for the year using the formula (lesser of A and B) discussed in ¶ 21); and
  
  
• the amount computed under paragraph 63(2)(b).

The amount computed under paragraph 63(2)(b) is the total of all periodic child care expense amounts (see ¶ 12) multiplied by the total of

• the number of weeks in the year during which the child care expenses were incurred and throughout which the supporting person (with the lower income) was

• the number of months in the year during which the child care expenses were incurred and the supporting person (with the lower income) was a part-time student (see ¶ 20) in attendance at a designated educational institution or secondary school (see ¶ 27) and for which weeks or part weeks were not included in the preceding calculation.

If the amount paid for child care expenses exceeds the amount deducted by the higher income taxpayer, the supporting person may claim the excess to the extent permitted by subsection 63(1). In addition to the above limitations, claims for child care expenses when there has been a separation and reconciliation as described in ¶ 17(d) are subject to the comments in ¶ 18.

Child care expenses while at school

¶ 26. In addition to amounts which may be deductible under either the general rule at ¶ 21 or by the higher income taxpayer at ¶ 24, a taxpayer may be entitled to claim an amount of child care expenses for eligible children under subsection 63(2.2) (see ¶ 19) for periods during which the taxpayer was a student in attendance at a designated educational institution or secondary school (see ¶ 27) enrolled in a full-time or part-time program (see ¶ 20). See Form T778, Child Care Expenses Deduction for assistance in calculating the amount available to a particular taxpayer (as discussed in ¶ 28).

The deduction for child care expenses where a taxpayer is a student is limited under subsection 63(2.3) to the least of the following amounts:

Designated educational institution

¶ 27. Designated educational institution, as defined in subsection 118.6(1), means any of the following:

Note: Draft amendments to the Act were released in February 2004. Proposed amendments to subparagraph (a)(i) of the definition of “designated educational institution” in subsection 118.6(1), if enacted, would apply to the 1998 and subsequent taxation years. Under ¶ 27(a), the responsible Quebec minister would be renamed to the Minister of Education of the province of Quebec and the Quebec statute would be renamed as an Act respecting financial assistance for education expenses, R.S.Q., c. A-13.3.

Form T778 and receipts

¶ 28. A claim for child care expenses is made by filing with the claimant's return a completed Form T778, Child Care Expenses Deduction. Receipts for child care expenses are not required to be sent with the claimant's return. When the claimant's return is filed electronically (“E-filed”), the requirement to file Form T778 is also waived. However, these documents should nevertheless be retained and readily available as the CRA has the authority under subsection 220(2.1) to subsequently request them as proof of the claims being made or in support of the information being reported. Every receipt for child care expenses should be made out to the individual who paid the child care expenses. When the child care services are provided by an individual resident in Canada, the receipt must show the caregiver's social insurance number.

Other situations

¶ 29. The definition of child care expense in subsection 63(3) requires that the expense be incurred for child care services provided in Canada by a resident of Canada. However, there are two exceptions to this rule:

• Under section 64.1, a taxpayer who is, throughout all or a part of a taxation year, not physically present in Canada, but who nevertheless continues to be resident in Canada for income tax purposes (i.e., a factual or a deemed resident of Canada), is not subject to the “in Canada” requirement. Accordingly, such a taxpayer is allowed to deduct payments for child care services provided outside Canada by a non-resident if the other requirements in section 63 are met.
  
  
• In certain circumstances, subsection 63(4) deems amounts paid for child care services provided in the United States to a taxpayer residing in Canada near the Canada-United States boundary to be eligible child care expenses for the purposes of section 63. The child care services must be provided at a place that is closer to the taxpayer's principal place of residence by a reasonably accessible route, having regard to the circumstances, than any place in Canada where such child care services are available. Subsection 63(4) does not apply to expenses paid for a child's attendance at a boarding school or camp outside Canada.

Impact of child care expense claims

Child tax benefit supplement

¶ 30. A claim for child care expenses under section 63 may reduce an individual's entitlement to the child tax benefit supplement under subsection 122.61(1). The supplement, which is available for each qualified dependant who is under 7 years of age at the start of each month, is reduced by 25% of the child care expenses deducted under section 63 for all qualified dependants by the individual or the individual's “cohabiting spouse or common-law partner” (as defined in section 122.6).

Disability tax credit supplement

¶ 31. A claim for child care expenses under section 63 may reduce an individual's entitlement to a disability tax credit supplement under subsection 118.3(1), which is available for certain individuals under 18 years of age at the end of the year who have a severe and prolonged mental or physical impairment. The supplement is reduced by the excess, over a certain threshold, of the total child care expenses paid in the year and claimed for income tax purposes in respect of the child.

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Explanation of Changes

Introduction

The purpose of the Explanation of Changes is to give the reasons for the revisions to an interpretation bulletin. It outlines revisions that we have made as a result of changes to the law, as well as changes reflecting new or revised interpretations of the CRA.

Reasons for the Revision

This bulletin updates the former IT-495R2, which discussed the income tax treatment of child care expenses. It has been revised primarily to reflect amendments in the Income Tax Act up to and including S.C. 2004, c. 24.

Legislative and Other Changes

Changes to the Summary reflect new maximum amounts that may be deducted for child care expenses for eligible children.

¶ 1 has been revised pursuant to the new definition of child care expense at subsection 63(3).

New ¶ 4 discusses the term day sports school.

¶ 5 (former ¶ 3) includes a reference to the new periodic child care expense amount.

¶ 7 (former ¶ 5) reflects the amendment to the definition of eligible child, which raises the qualifying age to 16.

New ¶ 9 defines spouse and common-law partner. References to common-law partners have been added throughout the bulletin. Draft amendments which, if enacted, will revise the definition of common-law partner for the 2001 and subsequent taxation years are discussed in an italicized note.

New ¶ 11 discusses the new annual child care expense amount.

New ¶ 12 explains the new periodic child care expense amount.

¶ 17 (former ¶ 12) reflects amended subsection 63(2) which allows the higher income taxpayer to deduct child care expenses during a period when the supporting person with the lower income was a student in attendance at a designated educational institution or secondary school and enrolled in a part-time educational program. Draft amendments which, if enacted, will require that certifications by medical doctors as described at ¶ 17(b) be in writing are discussed in an italicized note.

¶ 18 (former ¶ 13) provides an expanded discussion of child care expense deductibility in shared custody situations.

New ¶s 19 and 26 have been added to explain how additional child care expenses for periods during which the taxpayer was a student in attendance at a designated educational institution or secondary school enrolled in a full-time or part-time program may now be deductible under subsection 63(2.2).

New ¶ 20 discusses full-time and part-time programs.

¶ 21 (former ¶ 14) has been revised to reflect the changes to the general calculation of child care expenses deductible under subsection 63(1).

¶ 22 (former ¶ 17) has been revised to include, in the definition of earned income, governmental financial assistance, fellowships and prizes. Subsection 81(4) payments for volunteer services, which may be excluded from income, may be included in the earned income calculation if they are otherwise eligible amounts as described in this paragraph.

¶ 24 (part of former ¶ 15) has been modified to reflect the new calculation of child care expenses for the higher income taxpayer, which may be limited under subsection 63(2).

New ¶ 27 provides a definition of the term designated educational institution. Draft amendments which, if enacted, will revise the definition for the 1998 and subsequent taxation years are discussed in an italicized note.

New ¶ 31 is a discussion of an individual's entitlement to the disability tax credit supplement under subsection 118.3(1) which may be reduced by claims for child care expenses under section 63.

Throughout the bulletin, we have made other changes for clarification or readability purposes.