What are the child care expense deduction limits for 2026, and which spouse claims them?
For 2026, the child care expenses deduction is capped at $8,000 per child under 7 at year end, $5,000 per older child under 16, and $11,000 per child eligible for the disability tax credit. The total can't exceed two thirds of earned income, and the lower income spouse usually claims it on line 21400.
What are the child care deduction limits for 2026?
The annual child care expense amount is $8,000 for a child under 7 at the end of the year, $11,000 for a child who qualifies for the disability tax credit under section 118.3, and $5,000 in every other case, per the definition in ITA 63(3) laws-lois.justice.gc.ca. These amounts aren't indexed. They last moved when each limit rose by $1,000 for 2015 and later years
canada.ca.
| Child (2026 tax year) | Annual limit | Overnight camp or boarding school cap |
|---|---|---|
| Born in 2020 or later (under 7 at December 31) | $8,000 | $200 a week |
| Born 2010 to 2019 | $5,000 | $125 a week |
| Any age, disability tax credit can be claimed | $11,000 | $275 a week |
| 16 or older, infirm and dependent, no disability tax credit | $5,000 | $125 a week |
The birth years follow the 2025 form, which sets $8,000 for children born in 2019 or later and $5,000 for those born 2009 to 2018, moved forward one year canada.ca. The weekly caps for overnight camps and boarding school stays come from note 1 of Part A on that form. They're the annual limit divided by 40, the "periodic child care expense amount" in ITA 63(3).
The limits pool. Line 4 of Form T778 adds the limit for every eligible child, and the claim is the least of that total, the expenses actually paid, and two thirds of earned income canada.ca. So $11,000 of daycare for a 3 year old can be fully deductible when a 10 year old sibling has no costs at all, since $8,000 plus $5,000 is $13,000. List every eligible child in Part A, even the ones you paid nothing for.
Why two thirds of earned income often sets the real cap
ITA 63(1) limits the deduction to the lesser of the pooled annual amounts and two thirds of the claimant's earned income laws-lois.justice.gc.ca. Earned income means employment income, net business income as a sole proprietor or active partner (losses ignored), the taxable part of scholarships and research grants, CPP or QPP disability benefits and apprenticeship grants
canada.ca. Investment and rental income aren't on that list.
Take a couple with children born in 2021 and 2017 who paid $14,500 of daycare and after school care in 2026. The lower income spouse earned $18,000 of employment income.
| T778 line | Arithmetic | Result |
|---|---|---|
| Line 4: pooled limit | $8,000 + $5,000 | $13,000 |
| Line 5: expenses paid | Receipts | $14,500 |
| Line 6: two thirds of earned income | $18,000 times 2/3 | $12,000 |
| Line 7: least of the three | Lowest figure | $12,000 |
The deduction is $12,000. The extra $2,500 of receipts is lost: unclaimed expenses cannot be carried forward to another year.
When can the higher income spouse claim instead?
If your client lived with the child's other parent, or with a spouse or common law partner, at any time in the year and in the first 60 days of the next year, the person with the lower net income must claim, even at zero income canada.ca. Net income for this test is line 23600 before the child care deduction and any social benefits repayment. With equal net incomes, the two agree on who claims.
The higher earner can claim only for periods when the lower income person was in one of these situations canada.ca:
| Lower income person's situation | Counted by | Proof |
|---|---|---|
| Enrolled in a part time educational program (12 hours a month) | Month | Enrolment |
| Enrolled in a full time educational program (10 hours a week) | Week | Enrolment |
| Confined at least two weeks to bed, wheelchair or hospital | Week | Statement from a medical doctor or nurse practitioner |
| Infirmity likely to continue indefinitely | Week | Statement from a medical doctor or nurse practitioner |
| Confined to a prison or similar institution at least two weeks | Week | None listed |
| Separated at year end for 90 days or more from the breakdown, reconciled within 60 days of the next year | Week | None listed |
Part C of T778 caps the higher earner at 2.5% of the line 4 limit times the qualifying weeks, plus the same 2.5% times qualifying months for part time study canada.ca. That's the 1/40 periodic amount from ITA 63(2) and 63(3)
laws-lois.justice.gc.ca. An educational program must last at least three consecutive weeks to count at all.
Same family, but the lower income spouse earned $9,000 and spent 16 weeks in a full time college program. The higher earner computes first: 2.5% of $13,000 is $325, times 16 weeks is $5,200, which is less than their own line 7 of $13,000, so they deduct $5,200. The lower income spouse then takes their own line 7 ($9,000 times 2/3, or $6,000) minus the $5,200, and deducts $800. The household total is $6,000, with each spouse filing a separate T778.
Which expenses qualify and which don't?
Qualifying payments go to caregivers, daycare centres and day nursery schools, the child care part of school fees, day camps and day sports schools whose main goal is caring for children, and boarding schools or overnight camps up to the weekly caps canada.ca.
| Usually deductible | Not deductible |
|---|---|
| Licensed daycare, home daycare, nanny or babysitter | Medical or hospital care, clothing, transportation |
| Before and after school programs | Tuition for a regular program or a sports study program |
| Summer day camp | Leisure lessons, like tennis, or Scouts registration |
| Overnight camp, up to $125, $200 or $275 a week | Any amount reimbursed or covered by financial assistance |
| Your share of CPP and EI paid for an in home caregiver | Care by the child's parent, your spouse, or someone you claim as a dependant |
Watch who gets paid. A caregiver under 18 who is related to your client doesn't qualify, and related means blood, marriage, common law partnership or adoption, so a 16 year old brother is out while a 16 year old niece is fine canada.ca. A grandparent qualifies as long as no one claims them as a dependant on line 30400, 30425, 30450 or 30500.
Every claim needs a receipt from the provider, and when the care came from an individual, that person's social insurance number canada.ca. Paper filers attach T778 but not the receipts. An individual caring for the child in your client's home may also make your client an employer, which is where the CPP and EI share comes from
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Who counts as an eligible child?
The child must be your client's or their spouse's child, or a child dependent on them whose net income doesn't exceed the threshold, and the child must have lived with the claimant when the expense was incurred canada.ca. The child must also be under 16 at some time in the year, unless the child is dependent and has a mental or physical infirmity.
The income test applies only to the second group, such as a grandchild or niece living with your client: under ITA 63(3) your client's own child qualifies at any income laws-lois.justice.gc.ca. The threshold is $16,129 for 2025
canada.ca. The Act ties it to the indexed amount in 118(1.1), the maximum basic personal amount, so expect it to match the 2026 basic personal amount of $16,452 when the 2026 form is released
laws-lois.justice.gc.ca. As of October 2026, the CRA's current T778 is the 2025 version
canada.ca.
Which edge cases change the T778 claim?
A couple who married or became common law partners during the year both use net income for the whole year to decide who claims, and include the child care both paid all year canada.ca.
On a final return, the deceased can claim care paid while living with the child as if they were the only supporting person. A surviving parent can do the same for expenses not claimed on the other return. Factual and deemed residents living abroad can deduct payments to a nonresident caregiver for care outside Canada, and newcomers and emigrants claim for their period in Canada canada.ca.
Quebec residents can include the basic contribution paid directly to a subsidized child care provider on the federal claim. When an employer paid the care, only the part included in your client's income is deductible canada.ca. For the CRA's full position, including the supporting person definition and student claims under 63(2.2), see Folio S1-F3-C1
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Sources
Can unused child care expenses be carried forward?
No. The expenses must be for services provided in the tax year, and amounts your client can't deduct that year are lost canada.ca.
Is the deduction per child or per family?
Per family, in effect. T778 adds each child's limit into one total on line 4 and compares it with all expenses paid, so a large daycare bill for one child can use another child's unused limit canada.ca.
Does the child care deduction lower the Canada child benefit?
No, it can raise it. Line 21400 is subtracted before net income on line 23600 canada.ca, and the benefit is based on adjusted family net income, so a bigger deduction can mean a larger Canada child benefit
canada.ca.
Where does a child with the disability tax credit go on T778?
On line 2 at $11,000, at any age, and your client attaches Form T2201 or a note naming who filed it and for which year canada.ca. See the disability tax credit for the certificate itself.
General information for the tax year shown, not advice for a specific client. Confirm the facts before you file or remit.