Running a daycare means you're a business in CRA's eyes — which is mostly good news, because a long list of everyday costs becomes deductible. Here's the practical version. (Educational only, not tax advice — confirm specifics with an accountant.)
Deductions most providers can claim
- Food and supplies — meals and snacks served to children, craft supplies, diapers/wipes, cleaning supplies.
- Toys & equipment — small items expense immediately; bigger purchases (playground structures, furniture, computers) are depreciated as capital cost allowance (CCA).
- Business-use-of-home (home daycares) — a share of rent or mortgage interest, utilities, property tax, insurance and maintenance, prorated by the space used and the hours children are present.
- Wages and payroll costs — staff pay plus the employer share of CPP and EI, and WorkSafeBC premiums in BC.
- Professional services & software — your accountant, licensing fees, training/ECE certification costs, and your childcare management software.
- Vehicle costs — the business share of trips for supplies, field trips, or training (keep a mileage log).
GST/HST: usually exempt
Childcare for children 14 and under is generally GST/HST-exempt. You don't charge tax on tuition, you don't register for GST for the childcare itself, and you can't claim input tax credits on daycare purchases. If you sell something separate (e.g., renting your space out), different rules can apply.
If you have employees: payroll obligations
You must withhold income tax, CPP and EI from staff pay, remit them to CRA on schedule, pay the employer share, issue T4s each February, and (in BC) register with WorkSafeBC. See our full daycare payroll guide — and note Mitten turns your staff's tracked hours into gross pay and pay stubs automatically.
Records CRA expects
- Receipts for every expense (photos are fine; keep 6 years)
- Attendance records — they support your income figures and your business-use-of-home hours
- Receipts issued to parents
- A separate bank account makes everything cleaner
Digital attendance and billing records make tax season dramatically easier — one export instead of a shoebox of paper.
Run your daycare on Mitten — free to start
Mitten does everything in this guide — daily reports, photos, messaging, billing, even payroll prep — free for your first 5 children, then just $20/mo + $2 per child.
Start free — no card needed → See the live demoFrequently asked questions
- Is childcare GST/HST exempt in Canada?
- Childcare services for children 14 and under are generally GST/HST-exempt, which means you don’t charge GST on tuition — but you also can’t claim input tax credits on related purchases. Confirm your situation with an accountant.
- Can I deduct part of my home for a home daycare?
- Yes — business-use-of-home expenses (a reasonable share of rent or mortgage interest, utilities, insurance, maintenance) based on space and hours used for the daycare. CRA expects a defensible calculation, so keep your math.
- Do I need to issue receipts to parents?
- Yes. Parents need receipts to claim child care expenses on their returns, and CRA expects providers to issue them — include your name, address, the amount, the child’s name, and for home providers, your SIN.