Along with the back-to-school routines, harried parents have also begun the
ritual of shuttling their offspring to a plethora of extracurricular activities,
from dance to piano to hockey.
Aside from providing youngsters with a fun way to enrich their school day,
these afterschool programs offer the added bonus of allowing parents an
additional hour or two at work before they have to scramble to pick them up. As
any parent knows, the costs of such programs can add up.
Wouldn't it be nice if the cost of these extracurricular activities was
tax-deductible? Thanks to a tax case recently decided, they may be.
In her 2004 tax return, Deborah Jones, a certified general accountant living
in Duncan, B.C., deducted nearly $1,000 in fees that she paid for her
12-year-old daughter to attend afterschool gymnastics classes twice a week. The
classes began at 3:30 p.m. and lasted two to three hours.
Ms. Jones testified that she needed to make child-care arrangements for her
daughter after school until she finished work. She was unable to find a
babysitter so she attempted to find "an arrangement that was affordable and
acceptable to her daughter." Gymnastics twice per week, combined with other
extracurricular activities at school, provided Ms. Jones with the extra coverage
she needed.
The question the judge had to answer was whether or not an after school
recreational program such as gymnastics could be considered a "child-care
service" for purposes of the child care expense deduction in the Income Tax Act.
The child-care expense deduction is designed to provide tax relief for
parents who, to enable them to work or pursue an education, incur child-care
expenses.
The Canada Revenue Agency objected to the classification of gymnastics as
child care, telling Ms. Jones that "her daughter was considered old enough to
stay home alone after school and that child care was not needed for that portion
of the day."
While Ms. Jones did agree that her daughter might have been old enough to go
home after school, she refused to remain at home alone.
The judge reviewed previous cases and found that taxpayers have generally
been unsuccessful in deducting fees for recreational activities as child-care
expenses, since they "generally lack an essential characteristic of child care,
which is to 'watch over' or 'protect' the child."
However, the judge concluded that in order to determine whether a particular
activity can be considered a "child-care service," we must look at the primary
reason for enrolling the child in the activity.
Fortunately for Ms. Jones, the judge accepted her testimony that she enrolled
her daughter in gymnastic classes primarily as child care since she could not
force her daughter to remain home alone at the age of 12, especially if the
child refused to do so. The judge allowed a full deduction of the fees paid.
While this case may seem to open the door for deducting all sorts of
extracurricular activities, readers should note that each case will be decided
on its own facts and the onus may be on the taxpayer to prove that the
activities were "primarily" child care.