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Income Tax Act (R.S.C., 1985, c. 1 (5th Supp.))

Full Document:  

Act current to 2024-02-06 and last amended on 2024-01-22. Previous Versions

PART IIncome Tax (continued)

DIVISION BComputation of Income (continued)

SUBDIVISION EDeductions in Computing Income (continued)

Marginal note:Reserve for debt forgiveness for corporations and others

 There may be deducted as a reserve in computing the income for a taxation year of a taxpayer that is a corporation or trust resident in Canada throughout the year or a non-resident person who carried on business through a fixed place of business in Canada at the end of the year such amount as the taxpayer claims not exceeding the least of

  • (a) the amount determined by the formula

    A - B

    where

    A
    is the amount, if any, by which
    • (i) the total of all amounts each of which is an amount that, because of the application of section 80 to a commercial obligation (within the meaning assigned by subsection 80(1)) issued by the taxpayer (or a partnership of which the taxpayer was a member) was included under subsection 80(13) in computing the income of the taxpayer for the year or a preceding taxation year or of the partnership for a fiscal period that ends in that year or preceding year (to the extent that, where the amount was included in computing income of a partnership, it relates to the taxpayer’s share of that income)

    exceeds the total of

    • (ii) all amounts each of which is an amount deducted under paragraph 80(15)(a) in computing the taxpayer’s income for the year or a preceding taxation year, and

    • (iii) all amounts deducted under section 61.3 in computing the taxpayer’s income for the year or a preceding taxation year, and

    B
    is the amount, if any, by which the amount determined for A in respect of the taxpayer for the year exceeds the total of
    • (i) the amount that would be determined for A in respect of the taxpayer for the year if that value did not take into account amounts included or deducted in computing the taxpayer’s income for any preceding taxation year, and

    • (ii) the amount, if any, included under section 56.3 in computing the taxpayer’s income for the year,

  • (b) the total of

    • (i) 4/5 of the amount that would be determined for A in paragraph 61.4(a) in respect of the taxpayer for the year if that value did not take into account amounts included or deducted in computing the taxpayer’s income for any preceding taxation year,

    • (ii) 3/5 of the amount that would be determined for A in paragraph 61.4(a) in respect of the taxpayer for the year if that value did not take into account amounts included or deducted in computing the taxpayer’s income for the year or any preceding taxation year (other than the last preceding taxation year),

    • (iii) 2/5 of the amount that would be determined for A in paragraph 61.4(a) in respect of the taxpayer for the year if that value did not take into account amounts included or deducted in computing the taxpayer’s income for the year or any preceding taxation year (other than the second last preceding taxation year), and

    • (iv) 1/5 of the amount that would be determined for A in paragraph 61.4(a) in respect of the taxpayer for the year if that value did not take into account amounts included or deducted in computing the taxpayer’s income for the year or any preceding taxation year (other than the third last preceding taxation year), and

  • (c) where the taxpayer is a corporation that commences to wind up in the year (otherwise than in circumstances to which the rules in subsection 88(1) apply), nil.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • 1995, c. 21, s. 20

Marginal note:Moving expenses

  •  (1) There may be deducted in computing a taxpayer’s income for a taxation year amounts paid by the taxpayer as or on account of moving expenses incurred in respect of an eligible relocation, to the extent that

    • (a) they were not paid on the taxpayer’s behalf in respect of, in the course of or because of, the taxpayer’s office or employment;

    • (b) they were not deductible because of this section in computing the taxpayer’s income for the preceding taxation year;

    • (c) the total of those amounts does not exceed

      • (i) in any case described in subparagraph (a)(i) of the definition eligible relocation in subsection 248(1), the total of all amounts, each of which is an amount included in computing the taxpayer’s income for the taxation year from the taxpayer’s employment at a new work location or from carrying on the business at the new work location, or because of subparagraph 56(1)(r)(v) in respect of the taxpayer’s employment at the new work location, and

      • (ii) in any case described in subparagraph (a)(ii) of the definition eligible relocation in subsection 248(1), the total of amounts included in computing the taxpayer’s income for the year because of paragraphs 56(1)(n) and (o); and

    • (d) all reimbursements and allowances received by the taxpayer in respect of those expenses are included in computing the taxpayer’s income.

  • Marginal note:Moving expenses of students

    (2) There may be deducted in computing a taxpayer’s income for a taxation year the amount, if any, that the taxpayer would be entitled to deduct under subsection (1) if the definition eligible relocation in subsection 248(1) were read without reference to subparagraph (a)(i) of that definition and if the word “both” in paragraph (c) of that definition were read as “either or both”.

  • Definition of moving expenses

    (3) In subsection 62(1), moving expenses includes any expense incurred as or on account of

    • (a) travel costs (including a reasonable amount expended for meals and lodging), in the course of moving the taxpayer and members of the taxpayer’s household from the old residence to the new residence,

    • (b) the cost to the taxpayer of transporting or storing household effects in the course of moving from the old residence to the new residence,

    • (c) the cost to the taxpayer of meals and lodging near the old residence or the new residence for the taxpayer and members of the taxpayer’s household for a period not exceeding 15 days,

    • (d) the cost to the taxpayer of cancelling the lease by virtue of which the taxpayer was the lessee of the old residence,

    • (e) the taxpayer’s selling costs in respect of the sale of the old residence,

    • (f) where the old residence is sold by the taxpayer or the taxpayer’s spouse or common-law partner as a result of the move, the cost to the taxpayer of legal services in respect of the purchase of the new residence and of any tax, fee or duty (other than any goods and services tax or value-added tax) imposed on the transfer or registration of title to the new residence,

    • (g) interest, property taxes, insurance premiums and the cost of heating and utilities in respect of the old residence, to the extent of the lesser of $5,000 and the total of such expenses of the taxpayer for the period

      • (i) throughout which the old residence is neither ordinarily occupied by the taxpayer or by any other person who ordinarily resided with the taxpayer at the old residence immediately before the move nor rented by the taxpayer to any other person, and

      • (ii) in which reasonable efforts are made to sell the old residence, and

    • (h) the cost of revising legal documents to reflect the address of the taxpayer’s new residence, of replacing drivers’ licenses and non-commercial vehicle permits (excluding any cost for vehicle insurance) and of connecting or disconnecting utilities,

    but, for greater certainty, does not include costs (other than costs referred to in paragraph 62(3)(f)) incurred by the taxpayer in respect of the acquisition of the new residence.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • R.S., 1985, c. 1 (5th Supp.), s. 62
  • 1998, c. 19, s. 102
  • 1999, c. 22, s. 17
  • 2000, c. 12, s. 142
  • 2009, c. 2, s. 16
  • 2017, c. 33, s. 17

Marginal note:Child care expenses

  •  (1) Subject to subsection 63(2), where a prescribed form containing prescribed information is filed with a taxpayer’s return of income (other than a return filed under subsection 70(2) or 104(23), paragraph 128(2)(e) or subsection 150(4)) under this Part for a taxation year, there may be deducted in computing the taxpayer’s income for the year such amount as the taxpayer claims not exceeding the total of all amounts each of which is an amount paid, as or on account of child care expenses incurred for services rendered in the year in respect of an eligible child of the taxpayer,

    • (a) by the taxpayer, where the taxpayer is described in subsection (2) and the supporting person of the child for the year is a person described in clause (i)(D) of the description of C in the formula in that subsection, or

    • (b) by the taxpayer or a supporting person of the child for the year, in any other case,

    to the extent that

    • (c) the amount is not included in computing the amount deductible under this subsection by an individual (other than the taxpayer), and

    • (d) the amount is not an amount (other than an amount that is included in computing a taxpayer’s income and that is not deductible in computing the taxpayer’s taxable income) in respect of which any taxpayer is or was entitled to a reimbursement or any other form of assistance,

    and 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, but not exceeding the amount, if any, by which

    • (e) the lesser of

      • (i) 2/3 of the taxpayer’s earned income for the year, and

      • (ii) the total of all amounts each of which is the annual child care expense amount in respect of an eligible child of the taxpayer for the year

    exceeds

    • (f) the total of all amounts each of which is an amount that is deducted, in respect of the taxpayer’s eligible children for the year, under this section in computing the income for the year of an individual (other than the taxpayer) to whom subsection 63(2) applies for the year.

  • Marginal note:Income exceeding income of supporting person

    (2) Where the income for a taxation year of a taxpayer who has an eligible child for the year exceeds the income for that year of a supporting person of that child (on the assumption that both incomes are computed without reference to this section and paragraphs 60(v.1) and 60(w), the amount that may be deducted by the taxpayer under subsection 63(1) for the year as or on account of child care expenses shall not exceed the lesser of

    • (a) the amount that would, but for this subsection, be deductible by the taxpayer for the year under subsection 63(1), and

    • (b) the amount determined by the formula

      A × C

      where

      A
      is the total of all amounts each of which is the periodic child care expense amount in respect of an eligible child of the taxpayer for the year, and
      B
      [Repealed, 2001, c. 17, s. 42]
      C
      is the total of
      • (i) the number of weeks in the year during which the child care expenses were incurred and throughout which the supporting person was

        • (A) a student in attendance at a designated educational institution or a secondary school and enrolled in a program of the institution or school of not less than 3 consecutive weeks duration that provides that each student in the program spend not less than 10 hours per week on courses or work in the program,

        • (B) a person certified in writing by a medical doctor or a nurse practitioner to be a person who

          • (I) was incapable of caring for children because of the person’s mental or physical infirmity and confinement throughout a period of not less than 2 weeks in the year to bed, to a wheelchair or as a patient in a hospital, an asylum or other similar institution, or

          • (II) was in the year, and is likely to be for a long, continuous and indefinite period, incapable of caring for children, because of the person’s mental or physical infirmity,

        • (C) a person confined to a prison or similar institution throughout a period of not less than 2 weeks in the year, or

        • (D) a person who, because of a breakdown of the person’s marriage or common-law partnership, was living separate and apart from the taxpayer at the end of the year and for a period of at least 90 days that began in the year, and

      • (ii) the number of months in the year (other than a month that includes all or part of a week included in the number of weeks referred to in subparagraph (i)), each of which is a month during which the child care expenses were incurred and the supporting person was a student in attendance at a designated educational institution or a secondary school and enrolled in a program of the institution or school that is not less than 3 consecutive weeks duration and that provides that each student in the program spend not less than 12 hours in the month on courses in the program.

  • Marginal note:Taxpayer and supporting person with equal incomes

    (2.1) For the purposes of this section, where in any taxation year the income of a taxpayer who has an eligible child for the year and the income of a supporting person of the child are equal (on the assumption that both incomes are computed without reference to this section and paragraphs 60(v.1) and 60(w), no deduction shall be allowed under this section to the taxpayer and the supporting person in respect of the child unless they jointly elect to treat the income of one of them as exceeding the income of the other for the year.

  • Marginal note:Expenses while at school

    (2.2) There may be deducted in computing a taxpayer’s income for a taxation year such part of the amount determined under subsection 63(2.3) as the taxpayer claims, where

    • (a) the taxpayer is, at any time in the year, a student in attendance at a designated educational institution or a secondary school and enrolled in a program of the institution or school of not less than 3 consecutive weeks duration that provides that each student in the program spend not less than

      • (i) 10 hours per week on courses or work in the program, or

      • (ii) 12 hours per month on courses in the program;

    • (b) there is no supporting person of an eligible child of the taxpayer for the year or the income of the taxpayer for the year exceeds the income for the year of a supporting person of the child (on the assumption that both incomes are computed without reference to this section and paragraphs 60(v.1) and 60(w); and

    • (c) a prescribed form containing prescribed information is filed with the taxpayer’s return of income (other than a return filed under subsection 70(2) or 104(23), paragraph 128(2)(e) or subsection 150(4)) for the year.

  • Marginal note:Amount deductible

    (2.3) For the purpose of subsection 63(2.2), the amount determined in respect of a taxpayer for a taxation year is the least of

    • (a) the amount by which the total of all amounts, each of which is an amount paid as or on account of child care expenses incurred for services rendered in the year in respect of an eligible child of the taxpayer, exceeds the amount that is deductible under subsection 63(1) in computing the taxpayer’s income for the year,

    • (b) 2/3 of the taxpayer’s income for the year computed without reference to this section and paragraphs 60(v.1) and 60(w,

    • (c) the amount determined by the formula

      A × C

      where

      A
      is the total of all amounts each of which is the periodic child care expense amount in respect of an eligible child of the taxpayer for the year, and
      B
      [Repealed, 2001, c. 17, s. 42]
      C
      is
      • (i) if there is a supporting person of an eligible child of the taxpayer for the year,

        • (A) the number of weeks, in the year, in which both the taxpayer and the supporting person were students who would be described in paragraph (2.2)(a) if that paragraph were read without reference to subparagraph (ii), and

        • (B) the number of months in the year (other than a month that includes all or part of a week included in the number of weeks referred to in clause (A)), in which both the taxpayer and the supporting person were students described in paragraph (2.2)(a), and

      • (ii) in any other case,

        • (A) the number of weeks, in the year, in which the taxpayer was a student who would be described in paragraph (2.2)(a) if that paragraph were read without reference to subparagraph (ii), and

        • (B) the number of months in the year (other than a month that includes all or part of a week included in the number of weeks referred to in clause (A)), in which the taxpayer was a student described in paragraph (2.2)(a),

    • (d) the amount by which the total calculated under subparagraph 63(1)(e)(ii) in respect of eligible children of the taxpayer for the year exceeds the amount that is deductible under subsection 63(1) in computing the taxpayer’s income for the year, and

    • (e) where there is a supporting person of an eligible child of the taxpayer for the year, the amount by which the amount calculated under paragraph 63(2)(b) for the year in respect of the taxpayer exceeds 2/3 of the taxpayer’s earned income for the year.

  • Marginal note:Definitions

    (3) In this section,

    annual child care expense amount

    annual child care expense amount, in respect of an eligible child of a taxpayer for a taxation year, means

    • (a) $11,000, if the child is a person in respect of whom an amount may be deducted under section 118.3 in computing a taxpayer’s tax payable under this Part for the year, and

    • (b) if the child is not a person referred to in paragraph (a),

      • (i) $8,000, if the child is under 7 years of age at the end of the year, and

      • (ii) $5,000, in any other case; (montant annuel de frais de garde d’enfants)

    child care expense

    child care expense means an expense incurred in a taxation year for the purpose of providing in Canada, for an eligible child of a taxpayer, child care services including baby sitting services, day nursery services or services provided at a boarding school or camp if the services were provided

    • (a) to enable the taxpayer, or the supporting person of the child for the year, who resided with the child at the time the expense was incurred,

      • (i) to perform the duties of an office or employment,

      • (ii) to carry on a business either alone or as a partner actively engaged in the business,

      • (iii) [Repealed, 1996, c. 23, s. 173]

      • (iv) to carry on research or any similar work in respect of which the taxpayer or supporting person received a grant, or

      • (v) to attend a designated educational institution or a secondary school, where the taxpayer is enrolled in a program of the institution or school of not less than three consecutive weeks duration that provides that each student in the program spend not less than

        • (A) 10 hours per week on courses or work in the program, or

        • (B) 12 hours per month on courses in the program, and

    • (b) by a resident of Canada other than a person

      • (i) who is the father or the mother of the child,

      • (ii) who is a supporting person of the child or is under 18 years of age and related to the taxpayer, or

      • (iii) in respect of whom an amount is deducted under section 118 in computing the tax payable under this Part for the year by the taxpayer or by a supporting person of the child,

    except that

    • (c) any such expenses paid in the year for a child’s attendance at a boarding school or camp to the extent that the total of those expenses exceeds the product obtained when the periodic child care expense amount in respect of the child for the year is multiplied by the number of weeks in the year during which the child attended the school or camp, and

    • (d) for greater certainty, any expenses described in subsection 118.2(2) and any other expenses that are paid for medical or hospital care, clothing, transportation or education or for board and lodging, except as otherwise expressly provided in this definition,

    are not child care expenses; (frais de garde d’enfants)

    earned income

    earned income of a taxpayer means the total of

    • (a) all salaries, wages and other remuneration, including gratuities, received by the taxpayer in respect of in the course of, or because of, offices and employments,

    • (b) all amounts that are included, or that would, but for paragraph 81(1)(a) or subsection 81(4), be included, because of section 6 or 7 or paragraph 56(1) (n), (n.1), (o) or (r), in computing the taxpayer’s income,

    • (c) all the taxpayer’s incomes or the amounts that would, but for paragraph 81(1)(a), be the taxpayer’s incomes from all businesses carried on either alone or as a partner actively engaged in the business, and

    • (d) all amounts received by the taxpayer as, on account of, in lieu of payment of or in satisfaction of, a disability pension under the Canada Pension Plan or a provincial pension plan as defined in section 3 of that Act; (revenu gagné)

    eligible child

    eligible child of a taxpayer for a taxation year means

    • (a) a child of the taxpayer or of the taxpayer’s spouse or common-law partner, or

    • (b) a child dependent on the taxpayer or the taxpayer’s spouse or common-law partner for support and whose income for the year does not exceed the amount determined for F in subsection 118(1.1) for the year

    if at any time during the year, the child

    • (c) is under 16 years of age, or

    • (d) is dependent on the taxpayer or on the taxpayer’s spouse or common-law partner and has a mental or physical infirmity; (enfant admissible)

    periodic child care expense amount

    periodic child care expense amount, in respect of an eligible child of a taxpayer for a taxation year, means 1/40 of the annual child care expense amount in respect of the child for the year; (montant périodique de frais de garde d’enfants)

    supporting person

    supporting person of an eligible child of a taxpayer for a taxation year means a person, other than the taxpayer, who is

    • (a) a parent of the child,

    • (b) the taxpayer’s spouse or common-law partner, or

    • (c) an individual who deducted an amount under section 118 for the year in respect of the child

    if the parent, spouse or common-law partner or individual, as the case may be, resided with the taxpayer at any time during the year and at any time within 60 days after the end of the year. (personne assumant les frais d’entretien)

  • Marginal note:COVID-19 – child care expenses

    (3.1) For the purpose of applying this section in respect of a taxpayer for the 2020 or 2021 taxation year,

    • (a) the definition child care expense in subsection (3) is to be read without reference to its paragraph (a) if at any time in the year the taxpayer was entitled to an amount referred to in subparagraph 56(1)(a)(iv) or (vii) or paragraph 56(1)(r), in respect of the year; and

    • (b) paragraph (b) of the definition earned income in subsection (3) is to be read as follows:

      • (b) all amounts that are included, or that would, but for paragraph 81(1)(a) or subsection 81(4), be included, because of section 6 or 7, subparagraph 56(1)(a)(iv) or (vii) or paragraph 56(1)(n), (n.1), (o) or (r), in computing the taxpayer’s income,

  • Marginal note:Commuter’s child care expense

    (4) Where in a taxation year a person resides in Canada near the boundary between Canada and the United States and while so resident incurs expenses for child care services that would be child care expenses if

    • (a) the definition child care expense in subsection 248(1) were read without reference to the words “in Canada”, and

    • (b) the reference in paragraph (b) of the definition child care expense in subsection 248(1) to “resident of Canada” were read as “person”,

    those expenses (other than expenses paid for a child’s attendance at a boarding school or camp outside Canada) shall be deemed to be child care expenses for the purpose of this section if the child care services are provided at a place that is closer to the person’s principal place of residence by a reasonably accessible route, having regard to the circumstances, than any place in Canada where such child care services are available and, in respect of those expenses, subsection 63(1) shall be read without reference to the words “and contains, where the payee is an individual, that individual’s Social Insurance Number”.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • R.S., 1985, c. 1 (5th Supp.), s. 63
  • 1994, c. 7, Sch. II, s. 36, Sch. VII, s. 3, Sch. VIII, s. 23, c. 21, s. 27
  • 1996, c. 23, s. 173
  • 1997, c. 25, s. 12
  • 1998, c. 19, ss. 10, 103
  • 1999, c. 22, s. 18
  • 2000, c. 12, s. 142, c. 19, s. 9
  • 2001, c. 17, s. 42
  • 2007, c. 2, s. 8
  • 2013, c. 34, s. 198
  • 2015, c. 36, s. 29
  • 2017, c. 33, s. 18
  • 2021, c. 23, s. 10
  • 2023, c. 26, s. 13(F)
 

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