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  • Tricky Day Care Calculations

    My daughter’s mother and I are going through an entire overhaul of our self made agreement. We have been doing this for the last six years. I need some advice on day care cost. For the last five six years we have been splitting the day care cost 50 -50. Our daughter is now in grade one. My current wife and I are in a position to be able to get her to school and pick her up after school without the day care services.

    The Bio mom needs to use the day care services so she can get to work and back. Our current child visitation schedule is a 40 – 60 split. My feeling at the moment is that if I don’t use the service on my days, I do need to pay for the day care service at all. If she needs to use the service she should pay for it on her days.

    What do you think? Am I being greedy? I have been paying expensive day care for the last six years, and was looking forward to the financial break of my daughter going to school for a full day. I am willing to make some lifestyle changes so I can go and pick her up after work.

    There are no court orders in place. We have made most our decisions based on what is best for our daughter. But this issues is a real sticking point in our negotiations.

    Thanks for your input. It is much appreciated.

    H.W.

  • #2
    I don't think you're being greedy, but it doesn't work that way "officially".

    Both parents are responsible for the day care costs, whether you use them or not. The costs are supposed to be split according to your incomes, so if your incomes are 60/40, that's how you split the costs.

    That said, your personal agreement can overide those rules, as long as it's signed and notarized. If it is just verbal, she can go to court any time and hit you for back expenses among other things.

    Revenue Canada looks at it differently. You can only claim daycare as an expense if you need it to work, not if you pay so your ex can use it. So she would get the deduction, not you, if you go by the book. So their principal is, the person who needs it is the person who has to pay. That's just for the purpose of using the deduction.

    There's all kinds of ways to look at it, I don't think one way is more "fair" than the other. Your child needs the care, whether she is with you or not. You are providing for your child. If your ex couldn't work, or had to lose hours, then there is less income, and the child suffers, or you pay more support, etc.

    You're best off just working out a compromise without fighting, even if you pay a few dollars. Ideally your ex should appreciate the gesture and be on good terms next time you need a favour. Good luck with that.

    Comment


    • #3
      Originally posted by Mess View Post
      I don't think you're being greedy, but it doesn't work that way "officially".

      Both parents are responsible for the day care costs, whether you use them or not. The costs are supposed to be split according to your incomes, so if your incomes are 60/40, that's how you split the costs.

      That said, your personal agreement can overide those rules, as long as it's signed and notarized. If it is just verbal, she can go to court any time and hit you for back expenses among other things.

      Revenue Canada looks at it differently. You can only claim daycare as an expense if you need it to work, not if you pay so your ex can use it. So she would get the deduction, not you, if you go by the book. So their principal is, the person who needs it is the person who has to pay. That's just for the purpose of using the deduction.

      There's all kinds of ways to look at it, I don't think one way is more "fair" than the other. Your child needs the care, whether she is with you or not. You are providing for your child. If your ex couldn't work, or had to lose hours, then there is less income, and the child suffers, or you pay more support, etc.

      You're best off just working out a compromise without fighting, even if you pay a few dollars. Ideally your ex should appreciate the gesture and be on good terms next time you need a favour. Good luck with that.
      Mess is right. Especially about how it's supposed to work (shared in proportion to income). Unfortunately, there are people out there who demand more, more, more. (Just read my posts!)

      If you can come to a fair compromise, that's great. If not, then you'll have to share the total daycare costs proportionately. But, given that, your ex is obligated to share any daycare refunds she receives on her income tax return in the same proportion that you paid towards the daycare expenses. So even if you cannot claim daycare, she can, and she should provide you with your proportionate share of the refund.

      Comment


      • #4
        Thanks for the response. Your explanation really helps me understand the concept.

        Here is where our situation becomes tricky. Maybe you can help. I'm on the 40% visitation end and she has her 60% of the time. But she also makes more money than me. It is only by 3 thousand or so. If I make less money then her shouldn't I be paying less than her for day care. (up until now it has been 50-50) As well, I have not received any of the daycare refunds at all.

        Could someone please explain the proportionate formula? If she makes 3000 more, how do i calculate that to a proportion? By making it a percent?

        Sorry for all the questions. It is so nice to come into the negotiation armed with knowledge. Thanks for sharing.

        Much appreciation.

        HM

        Comment


        • #5
          3k more doesn't mean anything without knowing the actual gross incomes. 20k vs 23k is a bigger difference than 100k vs 103k.

          Let's say you make 47k and she makes 50k. That is a 1.5% difference, I personally wouldn't raise a stink about that.

          She is probably claiming the kids as dependants, right? So she is the only one who can claim the daycare receipts. Let's say that is $7k and the tax rate is 33% so that is $2333 for her tax return. She should be applying that return to the daycare, and you should be splitting it so that you are getting $1150 off of your share of the daycare payment (or she could pay you cash when she gets her refund, but probably easier to negotiate if you say that counts for $1150 off of your daycare contribution.)

          So on a $7k daycare bill, you should pay$3500 - $1150 = $2350. Now you could also knock the 1.5% for earning 3k less than her, so call it $2300.

          That is by the book, I think it's pretty close to what the law clerk would calculate with software. But if you have just been paying 50/50 so far, you will have a hard time convincing her this is the way to go.

          If you are amicable and going through this overhaul, then I would suggest you go to a lawyer that does mediation, pay for an hour or two, get these calcultions done and clean up anything else you need. If she is interested in having a fair agreement you should be able to work it out. She probably won't believe you if say some guy named Mess told you on an internet message board.

          Comment


          • #6
            Originally posted by Mess View Post
            If she is interested in having a fair agreement you should be able to work it out. She probably won't believe you if say some guy named Mess told you on an internet message board.
            I love it. "But Mess told me its true!"


            Ok, I'm just going to throw it out there. I make 87,OOO and she makes 90, 000. I'm the furthest thing from an accountant that walked the planet. Grade nine math gives me a headache. She claims the child as the dependent on her tax returns.

            We decided to try to hash out most of it out face to face. Then go to either a mediator to figure out the hard stuff, or have an agreement in place and see if a lawyer will make it official.

            If you could throw a few more numbers my way I would be grateful. I'm not sure what you meant by not raising a stink over the 1.5%?

            This information is very enlightening.

            thanks

            HM

            Comment


            • #7
              Some more numbers...

              If she gets a $3040 tax refund on a $7000 daycare bill, then her 'out of pocket' cost is $7000 - $3040 = $3960.

              Your share would be 87 / (87+90) = 49.15% of that, which is $1946. In comparison, 50% of that would be $1980. Not worth fighting about.

              But if you ignore her tax refund (redo the calculations yourself with 0 in place of 3040), then you would be paying almost her entire 'out of pocket' daycare costs!

              Comment


              • #8
                so whith those caluclations, someone who got back 3047 in income tax but paid 5100 in daycare cost, the split should be caluclated by the difference of the 2 $2053. I would pay my proportionate share of the 2053

                Comment


                • #9
                  Exactly!

                  Note that she could get an income tax refund just because her employer deducted too much tax off her paycheque - that very often happens for people who make RRSP contributions. So you have to be careful to use just the amount that she got back **as a result of claiming daycare expenses** on her tax return.

                  There's a similar example here: http://www.justice.gc.ca/eng/pi/fcy-...ep7-etap7.html
                  This one also mentions that the increase in the National Child Benefit amount should also be used to reduce the net cost.
                  Last edited by dinkyface; 12-14-2009, 11:20 PM.

                  Comment

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