# child care write off?



## kubatron (Jan 17, 2011)

Hello

My wife and I are both self-employed.

She owns her own store and manufacturing company (albeit a small one) and I am a broker.

Question:

If we were to hire a nanny, and put her on payroll, can we write her off as an expense from our income(s)? Do we start a new company or pay her under mine or my wife's? She's INC and I am sole - prop, so probably under her.

The nanny wants cash but would OK being on payroll, so I just thought of this..

This is a very simplistic question and may have been asked before, but I could not find the answer.


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## ghostryder (Apr 5, 2009)

Unless something has changed since Symes v. Canada, no.


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## MoneyGal (Apr 24, 2009)

Nothing has changed since Symes. I'm always shocked that so little attention is paid to this issue.


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## ghostryder (Apr 5, 2009)

MoneyGal said:


> Nothing has changed since Symes. I'm always shocked that so little attention is paid to this issue.



Why? The court made a completely reasonable & rational decision.


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## MoneyGal (Apr 24, 2009)

I didn't say I was shocked by the outcome; I was not and I am not. I'm just shocked that the issue of the deductibility of childcare as a business expense is not raised more often.


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## Ihatetaxes (May 5, 2010)

It's the $7,000 maximum child care deduction that I have an issue with. Who can find decent care for under $600/month? This year we are spending $36,000 for two kids in a good Montessori daycare. Yes high end but they are not feeding the kids caviar off of gold teaspoons. And that the lower income earner has to claim the $7k? Who do you think actually pays that bill?


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## MoneyGal (Apr 24, 2009)

At some point I should investigate when that $7K limit (and the $4K limit for school-age kids) came in. It has never been adjusted for inflation since I've had kids, and my oldest is nearly 10. The effect is an erosion of the value of the deduction over time.


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## Jon202 (Apr 14, 2009)

The issue of child care in Canada (outside of Quebec) is overly complex and political when it does not need to be.

Starting off with the $7,000 annual credit which I'm not sure has ever been inflation-adjusted, is paltry. 2nd, the taxable $100/mth/child UCCB taxable benefit is laughable because those who do pay for child care still receive it. It's purpose IS FOR care. Lastly, the hodgepodge of provincial and municipal regulations and listing agents for day care centres ensures nothing is ever simple.

Argument is often "I did it without assistance, or my parents raised me without assistance so you should too." I agree, 15-30 years ago there were MANY MANY more stay at home mothers or grandmothers who could watch relatives or neighbours' children. 

Now, 2 income families are the norm due to living expenses and the birth rate is WAY down. It is good policy to encourage a high, sustainable birth rate to avoid peaks and valleys and ensure there are children there to become working adults to support us when we are old and grey.


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## MoneyGal (Apr 24, 2009)

When I was a kid, in the early 70's, 70% of women with a child under the age of 6 were not in the labour force. Today, nearly 70% of children with a child under the age of 6 are IN the labour force. The numbers have almost exactly reversed.

Source


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## CanadianCapitalist (Mar 31, 2009)

I agree that the $7,000 limit is ridiculous. In Ottawa, it typically costs children between 18 months and 30 months more than $1,000 per month in day care. When our twin boys were very little, we found out how ridiculous the child care deduction limit really was.


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## MoneyGal (Apr 24, 2009)

The issue of credits/deductions not increasing with inflation is colloquially known as "credit corrosion." Coupled with "bracket creep," this means that inflation risk percolates through the income tax system to affect people at all stages of life.


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## ghostryder (Apr 5, 2009)

MoneyGal said:


> At some point I should investigate when that $7K limit (and the $4K limit for school-age kids) came in. It has never been adjusted for inflation since I've had kids, and my oldest is nearly 10. The effect is an erosion of the value of the deduction over time.



When was the last time you called your MP and talked to them about this?





MoneyGal said:


> At some point I should investigate when that $7K limit (and the $4K limit for school-age kids) came in. It has never been adjusted for inflation since I've had kids, and my oldest is nearly 10. The effect is an erosion of the value of the deduction over time.


It was raised to $7000 in 1997. It had been $5000 prior to that.

In 1993 it was raised to $5000

In 1991 it was $4000 

(these are the <7yr old amounts)

According to the BOC's calculator, that $4000 in 1991 would be about $5800 today. So one could make the argument that this has been adjusted for inflation, in fact, more than inflation. It just hasn't happened exactly in lockstep with inflation every year.


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## Charlie (May 20, 2011)

Or that $7000 from 1997 would be $9300 today....

Seems the childcare limit is the remaining holdout from the days of no indexing...


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## ghostryder (Apr 5, 2009)

Charlie said:


> Or that $7000 from 1997 would be $9300 today....
> 
> Seems the childcare limit is the remaining holdout from the days of no indexing...


Arguably it has been indexed. It was raised far and above inflation in the 1990's and then plateaued.

From 1991 to 1997 if indexed to inflation it would have gone from $4000 to ~$4400. But it went up to $7000. Far above what it should have been if indexed.

If you are advocating indexing it to inflation, it's a bit dishonest to start at a point in time when it was higher than it "should have been" if indexed. 

Initially I went back as far as I could to find the amount of the deduction and started there. 

I haven't found a really good reference yet, but what I have found would indicate that the child care deduction started in 1972 and was $500.


http://www.ctf.ca/ctfweb/Documents/PDF/2001ctj/2001ctj3_gagne.pdf



> In 1999 dollars, the maximum annual per
> child deduction for children under 7 years of age increased from $2,119 in 1972


So if you take that $2119 in 1999 dollars and plug that into the BOC calculator to find what that would be in 1972, you end up at ~$500.

Adjusted for inflation, that $500 would be ~$2700 in 2011.

I think $7000 > $2700


Elsewhere in that link it says that the deduction limits were increased in 1976, 1983, 1988, 1993, and 1997. So effectively it has been indexed, just not on an annual basis, and at far more than it "should have" if it had been indexed to inflation.


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## sprocket1200 (Aug 21, 2009)

search the govt labour sites for live in nanny. you pay them minimum wage, can charge them rent, and claim the child care deduction.

alternatively, you can get an aupair and they just live with you. you give some spending money. super cheap, why would you ever send your kids to daycare? too much hassle!

the whole daycare cost thing is ridiculous anyway. if you have kids, pay for them yourself! (3 yrs old twins here, and we don't expect anyone else to pay for, nor look after our kids...)


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## kubatron (Jan 17, 2011)

sprocket1200 said:


> search the govt labour sites for live in nanny. you pay them minimum wage, can charge them rent, and claim the child care deduction.
> 
> alternatively, you can get an aupair and they just live with you. you give some spending money. super cheap, why would you ever send your kids to daycare? too much hassle!
> 
> the whole daycare cost thing is ridiculous anyway. if you have kids, pay for them yourself! (3 yrs old twins here, and we don't expect anyone else to pay for, nor look after our kids...)


I don't get your last statement. If you have kids, pay for them. What do you think daycare is? A spa treatment? No, it's 'PAYING FOR' "them".

Thx for the other two ideas.


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## kubatron (Jan 17, 2011)

Ihatetaxes said:


> It's the $7,000 maximum child care deduction that I have an issue with. Who can find decent care for under $600/month? This year we are spending $36,000 for two kids in a good Montessori daycare. Yes high end but they are not feeding the kids caviar off of gold teaspoons. And that the lower income earner has to claim the $7k? Who do you think actually pays that bill?


I gotta ask, how much money do you make to have after-tax $36K for daycare? 

Must be a lot.


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## Ihatetaxes (May 5, 2010)

It will be a chunk of take home income this year. And while its expensive we feel its worth every penny.


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