Maternity and parental benefits are not treated as “earned income” for purposes of the child care expense deduction.

“Earned income” is defined in 63(3) of the Income Tax Act. It includes:

(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;

At first glance it appears that maternity and parental benefits might be included in “earned income” because of paragraph (b) (which references paragraphs 56(1)(n), (n.1), (o), and (r)).

However, maternity and parental benefits are included in income by virtue of sub-paragraph 56(1)(a)(iv) and not by virtue of paragraph 56(1)(n), (n.1), (o), or (r). Accordingly, paragraph (b) of the definition does not apply and maternity and parental benefits are not “earned income”.