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  1. #1
    Expert Forum User The Ultimate London Mom!
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    Default Childcare deductions? How much do they really help you?

    If I make $45K and my DH $80k and we pay $25k a year in childcare for 4 kids then how much of that $25k do we save or see back when we submit it on our taxes etc? I don't fully understand how it works? Do we get a percentage back, does it just save us some taxes? Help?

    We are trying to figure out whether me staying home is an option or not.
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    Hi there,

    The deduction for childcare is a straight deduction off your taxable income so they reduce the income you need to pay tax on. Just like an RRSP deduction.

    The amount of tax you save depends on the tax bracket you're in but since the lower income spouse must claim the amounts it's usually around 21%. In the situation you describe, a person making 45K claiming $25K in childcare would save about $5,200 in tax - so instead of paying around $7000 in tax each year off your paycheque/at the end of the year you'd pay around $1,900. Ignoring the costs you may spend on clothes and transportation and food for work, in this situation you're probably left with about $15,000 of cash income for the year after paying for the childcare, taxes and CPP/EI on this level of income.

    If you decide to stay home and not have daycare costs then your husband could claim a spousal credit for you which would save him about $2000 in tax owing. A spousal credit is only available if your married/common-law and one person has no income or low income. If you stay home, have no daycare costs and your husband claims the spousal credit you're family cash would be lower by around $13,000 for the year.

    I hope this helps and doesn't just feel like numbers - let me know if you want more info or have a different example
    Last edited by strongmommy; 05-26-2011 at 06:02 AM.

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