With the escalating -- and in many cases, exorbitant --cost of summer camps,
you may be relieved to learn that part of those camp fees may indeed be tax
deductible.
Under the Income Tax Act, for camp fees to be deductible they must fall under
the general rubric of the "childcare expense" deduction, which is designed to
provide some tax relief for parents who incur childcare expenses to enable them
to work outside the home, run a business or pursue an education.
The general rules for childcare expenses permit you to deduct up to $7,000 a
year for each child under the age of 7, and up to $4,000 a year for each child
from 7 to 15.
If the child is eligible for the disability tax credit, you can claim up to
$10,000 of childcare fees.
Generally speaking, any childcare expenses must be claimed by the
lower-income parent.
So, where do camp fees fit in? The Act defines childcare expenses broadly to
include payments not only to such childcare providers, as babysitters, nannies,
nursery schools and daycare facilities, but also to day camps or summer
residential camps.
The Canada Revenue Agency, in discussing the types of day camps that may
qualify for the childcare deduction, uses the term "day sports school" that,
according to the CRA, "is intended to cover those day camps providing a
sufficient degree of childcare services."
Many summer camps include elements of child care, which are tax deductible,
as well as sports education and training, which are generally not tax
deductible.
Rather than having to prorate the camp fees into eligible and ineligible
portions, which would be nearly impossible to do -- and an administrative
nightmare -- the CRA has set out a list of factors that help determine whether a
particular sports program involves a sufficient degree of child care to qualify
as a deductible childcare expense.
Factors to consider include: age of the participating children, instructors'
qualifications, time devoted to the program, duration of the program, training
and educational facilities used and the extent to which progress is measured.
For example, the CRA's general position is that since day camps for young
children are generally for a limited period (a week or two) and provide a
sufficient degree of child care, such fees are usually fully eligible for the
childcare deduction.
On the other hand, older children who participate in a sports program for
lengthier periods of time, taught by instructors with physical education
degrees, where their progress is regularly monitored and "sophisticated training
methods and facilities are used," may be more properly classified as "education
and training" as opposed to child care.
For overnight camp, in addition to the normal childcare limits discussed
above, there are further caps on the amount of camp fees that can be claimed as
childcare expenses: $175 a week for each child under the age of seven, $100 a
week for each child between seven and 15, and $250 a week for each child who is
eligible for the disability tax credit.
In order to claim childcare expenses, including eligible camp fees, you need
to complete Form T778, Child Care Expenses Deduction with your tax return.
Although the CRA does not require you to send in your camp receipts with your
return, keep them in case the CRA asks to review them later on.