Stephanie asked:

I am an employer of a live-in nanny. I have a payroll business number and make contributions for CPP/EI and collect her taxes and her CPP/EI contributions. I issue a T4 for her. She pays us $75/week for room and board.

In addition to her salary, would my employer CPP/EI contributions qualify as eligible childcare expenses?

Can I report a property (rental) loss based on her room and board? She pays us the maximum amount allowed by provincial law, therefore I assume it is fair market value.

John R Mott answered:

An eligible child care expense is defined in the Income Tax Act to include "an amount paid, as or on account of child care expenses incurred for services rendered in the year in respect of an eligible child." It is my view that this definition is broad enough to include the employer portion of CPP and EI premiums paid in connection with a nanny's salary.

You ask a good question about the rent. You and the nanny are dealing with each other at arm's length (i.e. I am making the assumption that you are not related by blood or marriage). I think this provides you with a position for claiming a pro-rata share of home expenses against the rent. On the other hand, I don't think there is a necessary presumption that the provincial room and board rates represent fair market value. The purpose of the law is to protect domestic workers from abusive arrangements, not provide you with a fair rent.

Furthermore, CRA would likely argue that there is no profit making purpose behind your rental arrangement, you are motivated by a desire to provide in-home care for your child and not to earn a profit from room rental. I think that your ability to claim a rental loss would depend on your ability to prove that $75/week is a fair market rent for your accommodation and your area.

I anticipate that you might ask a supplemental question, which is whether your "rental loss" is itself a child care expense. Looking back again at the definition, I believe that it is.

About the author

John Mott is a chartered accountant and tax specialist with a private practice in mid-town Toronto. He provides tax, accounting and advisory services to individuals and small businesses. He may be visited online at: johnmott.com.

 
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