Updated Checked by the Tax-Services.ca editorial team How we check
A daycare in Canada has to keep records of every dollar in and out for six years from the end of the tax year they relate to. That includes parent fees and any provincial subsidy or grant, since the CRA counts both as daycare income. Daycare bookkeeping doesn’t need special software. It needs a habit.
What records does a daycare have to keep?
The CRA’s rule is general: keep the documents that support your income and expenses, in paper or electronic form. For a daycare, that covers a short list.
| Record | Why it matters |
|---|---|
| Fees received from parents, dated and per family | Shows gross income |
| Subsidies and provincial or territorial grants | The CRA counts these as daycare income |
| Receipts for food, supplies, toys, repairs | Support your expense claims |
| Bank statements for the daycare account | Tie the books to the bank |
| Payroll records and remittances, if you have staff | Show what you held back and paid |
| Rent, lease, utility and insurance bills | Support occupancy costs |
| Copies of filed returns | Six years of history |
Electronic copies are fine, as long as they stay readable and backed up. If you scan a paper receipt, keep the scan somewhere you won’t lose it. Small cash buys count too. The toonie-a-piece craft supplies and the $12 of snacks add up over a year, and a receipt in a monthly envelope beats a guess every time.
Does a daycare charge GST/HST?
Generally not. The CRA treats child care as an exempt supply when the main purpose is care and supervision of children 14 or under, for periods normally under 24 hours a day. The CRA memo says anyone can supply it. Camps or lessons where the main purpose is teaching aren’t the same thing, so ask if your program leans that way.
Whether an exempt provider can claim back GST/HST paid on purchases isn’t spelled out for daycares on that page, and for exempt supplies the general rule is that you can’t claim input tax credits. Ask your accountant, or ask the CRA, before you build a refund into a budget.
How does a home daycare report its income?
A self-employed home daycare reports gross income on line 13499 and net income on line 13500, using Form T2125 (the CRA lists industry code 624410). Expenses come off the gross to reach net. The CRA’s page on reporting daycare income says gross income includes payments from parents and subsidies such as provincial or territorial grants. The CRA says the deduction has to relate to earning the daycare income, so personal costs stay out.
Here’s a case. A home daycare in Ontario nets $45,000. The self-employed tax calculator gives $5,122.49 of income tax and $4,938.50 of CPP, for $10,060.99 in all. Your money left is $34,939.01. That’s before EI (not included) and before the calculator’s limits, which include no GST/HST and no allowance for claims that vary by household.
Notice how much of that is CPP. Self-employed people pay both halves, and that catches many new providers off guard.
When your tax owing goes over $3,000, instalments start. The tax instalments calculator shows four payments of $1,500 for $6,000 owing. A bank account you use only for the daycare makes that easy to see and easy to plan for.
What changes when you hire staff?
A lot. You become an employer, so you hold back income tax, CPP and EI, remit them and file slips after year end. One assistant paid $2,000 every two weeks in Ontario means $555.05 a period to the CRA in the payroll remittance calculator, made up of $398.41 held back from pay plus $156.63 of employer share. The full cost of that payroll, before workers’ compensation and other levies, is higher than the wage.
Provincial rules on staffing, ratios and licensing sit outside this page, and so do any record duties your province or a subsidy agency adds. Check with them directly.
What does a good month look like in the books?
Say a licensed centre has twenty families. On the first of the month it sends invoices, and by the tenth it has a list of who has paid and who hasn’t. Parent fees go in one account line and the monthly subsidy payment in another, so the subsidy doesn’t get lost among the cheques. Receipts for food and supplies go in an envelope or a scanned folder the day they’re bought. At month end somebody matches the bank statement to the list and writes down any difference.
It takes about an hour. Skip it for six months and the same job takes a weekend, with half the receipts missing.
What mistakes cost daycares money?
- Mixing personal and daycare spending in one account.
- Leaving subsidy payments out of income because they arrive from a program, not from a parent.
- Losing receipts for small items that add up over a year.
- Forgetting that cash fees are income too.
- Not setting aside money for CPP and tax, then facing one bill in April.
Once a month, match your bank statement to your records. It takes an hour and it saves days in March. If the books are already a mess, our page on moving to professional bookkeeping covers what to gather, and the minimum bookkeeping requirements apply to you too.
How we checked the figures
The daycare income rules come from Canada Revenue Agency pages on daycare in your home and reporting your income. The exemption comes from the CRA’s GST/HST memorandum on child care services. The six-year rule comes from CRA guidance on record retention. Examples use this site’s calculators with 2026 data. No government body has reviewed or endorsed what you read here.
Frequently asked questions
How long must a daycare keep its records?
Six years from the end of the last tax year they relate to, in paper or a readable electronic form.
Are subsidies and grants daycare income?
Yes. The CRA counts payments from parents and provincial or territorial subsidies as gross daycare income.
Does a daycare charge GST/HST?
Child care for children 14 or under, for periods normally under 24 hours a day, is generally exempt. Programs mainly for teaching may differ.
What form does a home daycare use?
Form T2125, with gross income on line 13499 and net income on line 13500.
Do I need a separate bank account?
The CRA doesn't require one on the pages we read, but it keeps daycare and personal spending apart and makes reconciling easier.
- Self-employed taxes in Canada: income, CPP and GST
How tax works when you are self-employed in Canada: reporting income and expenses, paying both halves of CPP, instalments and when to register for GST