Child arts and fitness credits/child care expense

I am working on updating the ProFile tax cases in our texbook to 2011 and I’ve run into an issue which may be relevant to some families this year. Sorry for the long post, especially when such immaterial amounts ($75) are involved, but this is only part of the response I received from our technical expert at the CRA.

I have resolved my case by adding a separate arts course receipt that sidesteps this issue, but if anyone out there is interested, here it is.

Last year (2010) in the case I made the camp a music camp so it would be ineligible for the fitness credit. Now that the children's art credit (CATC)is available, I had to look into the matter.

The issue I see is camp costs which have the limit of $100, 175, 250 per week. Many camps are more than that so I wondered if it is possible to split the camp fees so that the weekly maximum is taken for child care costs and what is above the limit is used for the fitness and/or arts credit.

THis is an excerpt of what I got back from my expert.

The tail end of the child care expense definition (ITA 63(3)) reads in part as follows;

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, …. are not child care expenses;

So I can interpret this to mean that if the music camp fees are in excess of the limit that would normally be allowed they would qualify for the CATC because the child care expenses definition deems the excess not to be child care expenses.

The definition of an “eligible expense” for the fitness credit excludes any amount “deductible” under section 63 as a child care amount. The definition of an “eligible expense” for the children’s arts credit would also similarly apply to child care expenses that are deductible. It seems that the design of the legislation of the child care expense, fitness and arts credits is that they are to be taken first as child care expenses (ITA 63) and if they are deductible irrespective of actual deduction prohibits either of the other two credits.

Next if both credits (arts and fitness) would apply that the fitness credit takes priority since the arts credit says that no amount is eligible for the arts credit to the extent that an amount is used to compute another tax credit. I don’t know whether it is possible to have an amount qualify for both the fitness and arts credit but the legislation appears to contemplate this eventuality.

So if an amount would qualify as a child care expense then no fitness or arts tax credit can be claimed for that amount. If however an amount fails to qualify as a “child care expense” as defined for ITA 63 purposes then that amount could potentially then qualify for the fitness or arts credit if the conditions of those credits are met. This is supported in T778 with the following note;

Note
Some expenses may not qualify for the child care expenses
deduction. However, they may qualify for the children’s fitness
amount or the children's arts amount if they meet the rules for
claiming an amount at lines 365 and 370 respectively.

MY OPINION
I'm sure this is more than most anyone wants to know about this topic. I don't understand why it has to be so complicated. This proliferation of credits for small amounts is making it increasingly difficult to keep our textbook coverage manageable.

I don't know how parents are going to cope with this, especially when the maximum benefit for a credit is $75 - unless there is a provincial component (another factor to consider).

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