School's out for summer, and Kristina Berg is getting ready to send her 15-year-old daughter to Camp Kawkawa near Hope, B.C.
She has put Jessica's name on all her clothes, including her socks, which are all pink, "so she can know which pair is hers." Bug spray is a must, as is a rain jacket. She figures she should pack an extra toothbrush, in case a friend forgets hers, and some makeup, of course. "Looking pretty is important, even if you're in the bush," jokes her mom.
One thing she hasn't figured out, however, is how she'll claim the $400 camp fee at tax time.
There are a variety of tax deductions parents can use to reduce childcare expenses, including a new one for 2011: the federal children's arts tax credit. Parents can claim up to $500 for each child under 16 registered in qualifying arts programs and receive a 15-per-cent tax deduction.
For sports programs, there's also the child fitness tax credit, and the same rules apply.
For parents such as Ms. Berg, however, it's not always obvious which programs qualify. At Camp Kawkawa, for example, the itinerary includes arts and crafts, but there's also water-skiing, swimming, archery and hiking.
"I consider myself fairly well versed in taxes and I still have problems doing it each year," says Ms. Berg, a mortgage broker who runs her own business in Langley, B.C.
The key to figuring out what's a childcare expense and what's a tax credit is in the program itinerary, says Cleo Hamel, senior tax analyst at H&R Block Canada in Calgary. If your child is going to swimming day camp, for example, you need to figure out whether the nature of the program is to teach your child swimming, in which case you would claim it under the fitness tax credit. If, however, it's a childcare program and one of the things they do is swim, that's considered a childcare expense.
It can be confusing, Ms. Hamel admits. "You've got a parent now having to figure out which of these expenses falls under which category. If we're talking strictly supervision - I'm putting my child in a daycare or a day home or even some of the summer-camp programs that have supervision as the main component - that's a childcare expense. And the government says you have to claim expenses that classify as childcare first."
How you claim children's activities has a big effect on your tax return. Childcare expenses reduce taxable income, providing a better return than a tax credit.
"If you have $1,000 in hockey receipts and you're going to claim the fitness credit, you're only going to get to claim $500 of that, and it's only a credit, so you're only going to get 15 per cent of the $500, so it's a $75 tax savings," Ms. Hamel says.
A $1,000 childcare expense, on the other hand, would provide a $150 federal tax refund, plus a provincial tax refund.
John Andrew, an assistant professor at Queen's University, says he always makes sure to get receipts up front for his children's programs, then leaves it to his accountant to sort out how to claim them. Trying to track down receipts at tax time is a major hassle, he says, and without them, parents can't claim a cent.
With two sons taking piano lessons, Mr. Andrew says he's grateful for the new arts tax credit, but wishes the rules could be simplified. When his 10-year-old goes to computer camp this summer, for example, he has no idea whether it will qualify for any of the tax credits.
"Where does a computer camp fit in? It's certainly not fitness, it's certainly not art, so it probably won't qualify for anything. Unless, does that qualify for childcare?" he asks. "I like to think I'm fairly up on these things, but there's certainly confusion in my mind as to how you can claim these things."
The tax savings don't stop at the federal level: Nova Scotia and Yukon have their own fitness tax credits; Ontario, Saskatchewan and Manitoba offer children's tax credits for both arts and fitness programs.
If you're still unsure how to classify your childcare expense, ask the agency providing the program. Large organizations will usually know which tax categories their services fall into, and will provide tax receipts. Receipts must include the child's full name, the program's name and description, the cost and the dates attended.
If certain receipts are not coming until year-end, make a note on your calendar to follow up or you'll risk losing out at tax time. "Keep those receipts, because they do add up," Ms. Hamel says.
Dianne Nice