Charam and Baka each have income of over $200,000. During the year, they paid a nanny $20,000 to care for their three children. Divya, age 5, has no income. Elina, age 10 is disabled and eligible for the disability tax credit. Hinda is 12 and has income of $25,000 which he earns from a TV acting job. What is the maximum deduction for child care costs for this family?

Question

Quizplus · Accepted Answer

The maximum deduction for child care costs in this scenario is $19,000. This is calculated based on the Canada Revenue Agency (CRA) guidelines, which allow a maximum of $8,000 for children under 7 (Divya), $5,000 for children with a disability eligible for the disability tax credit regardless of age (Elina), and $5,000 for children aged 7 to 16 (Hinda), unless they qualify for the disability amount. The total is $8,000 (for Divya) + $11,000 (maximum for Elina due to disability) + $5,000 (for Hinda) = $24,000. However, since Hinda has an income of $25,000, the deduction for her care must be reduced. The rule is that the deduction cannot exceed two-thirds of the child's income, which in Hinda's case would be $16,666.67. Therefore, the total maximum deduction considering Hinda's income would still be capped at $19,000 for the family, as it does not exceed the sum of the maximum allowed for each child based on their age and disability status.

Charam and Baka Each Have Income of Over $200,000