DAYCARE BUSINESS
Distinguishing business income from ‘other employment income’:
If you provide care for children part time or from time to time and it’s impossible to tell how long and steady the work is going to be, the CRA advises that the income should be reported as Other Employment Income (casual income), not business income.
Issue a receipt with your SIN:
Parents doing an individual tax return can deduct child care expenses to lower their tax but to do so they need an invoice that includes the provider’s SIN number.[1] For that reason the CRA expects self-employed individuals providing daycare services to issue invoices with their SIN included.
Include grants as income:
If you receive a subsidy or grant, for example under the Canada-Wide Early Learning and Child Care (CWELCC) system, the amount is included as income.
No HST registration:
Under the Excise Tax Act, child care services for children age 14 and under, for periods normally less than 24 hours per day, is an exempt supply.
If child care services is your only business, you cannot register for HST under the Excise Tax Act even if your income is above the $30,000 threshold. Therefore you cannot claim input tax credits.
Food:
If you provide food to the children you can claim the full amount, not just 50%. You can claim the expense on Line 8811 of T2125 (Office stationery and supplies).
Business-use-of-home expenses:
Expenses must be in proportion to use. If, for example total home expenses are $1,000, but you used 50% of the house for 10 hours a day, weekdays only, and the rest of the time the house is used or could be used personally, the calculation would be:
50% X (50 hours per week/168 hours per week) x $1000 = $149.
References:
[1] Income Tax Act, s.63(1): a parent may deduct childcare expenses if.. “the payment of which is proven by filing with the Minister one or more receipts each of which was issued by the payee and contains, where the payee is an individual, that individual’s Social Insurance Number…”