Quebec parents in for 'ugly surprise' at tax time with bill for increased daycare fees

Many Quebec parents with children in subsidized daycare are facing an added new twist this year when preparing their income tax returns: figuring out how much they owe the government in increased daycare fees.

The new fee structurewent into effect last April, but the bill for the extra amount that many parents owe for thelast eight months of 2015 isn't due until taxes are filed this spring.

"People will have a very ugly surprise when they do their taxes in April and wind up feeling very,very tight," said Jean Freed, a personal finance expert. "They may not have the money and may have to borrow it."

Families with no wiggle room

While all parents now pay a basic $7.30 a day per child, those with family incomes over $50,000 will have an extra amount tacked on at tax time.

The graduated increase starts at $50,000 and slowly creeps up as a household's income nears $75,000.

Above $75,000, the increase spikes sharply.

Families with a household income ofmore than $155,000will end up paying a total of $20 per child a day.

Freed says many people don't have a lot of wiggle room in their budgets.

"It's easy to say that higher income families can pay this extra amount," said Freed. "But the reality is, if you're paying more on everything, because you're higher income, it may not be that easy."

Because the increase in fees only went into effectlast April, familieswill only be charged for the period from April to the end of December.That works out toabout 182 days if a child is in daycare full-time.

Next year, the bill will be higher,Freed points out, when families will have to pay the fees for a full year.

Cutting back on extras

Mathieu Chan has two children at a subsidized daycarein Cte-des-Neiges.

He says he and his wifecarefully manage their budget and have cut back on a lot of extras already.

For his family, the increase will mean a shorter vacation or no vacation at all.

"I wish they would take money every month," said Chan. "It would be easier for us to manage than having the money taken at the end of the year on income tax."

Expecting 'bit of a surprise'

The government has an online calculatorto help families figure out how much extra they need to set aside, but it doesn't work foreveryone.

The incomes of parents who are self-employed or on contract fluctuate.

Manon de Raadswitched her two-year-old daughter Amliefrom a private daycare to a publicly subsidizedcentre de petite enfance(CPE)when a spot came open.

She's tried to put some money aside, but she has no idea if it's enough.

"We're not really prepared," said de Raad. "I am sure we will probably owe something. The first year is going to be a bit of a surprise."

Unprepared for big bill

Some families facing extra fees are panicking.

"They are scared," said Gina Gasparini, president of the Quebec Association of CPEs.

She says parents at the CPEshe runs are unprepared for the sudden arrival of a big bill.

"They don't want to have to live with that debt, but many parents are telling me they know they won't be able to pay it by April 30," said Gasparini.

Gasparini said some parents may reduce the number of days their children areat daycare. Her daycare has already seen the number of part-time children double.

And she's worried that some may decide to pull their child out altogether if it gets too expensive.

Expect cost-of-living increases

Lucien Bouchard'sParti Qubcoisgovernmentcreated the fixed-price system for non-profit, publicly subsidized daycaresin 1997, setting the fee at $5 a day.

During the 2014 election campaign, the PQwanted to keep the system universalbut increase the fee it charged everyone to $9 per day.

The Liberal government said it would not increase daycare fees.

However, the Couillard government, once in power, said the program was not sustainable as is and decided to index fees,based on income.

That change doesn't sit well with Coalition Avenir Qubec MNAAndr Lamontagne, the party's economycritic.

"We're one of the highest-taxed jurisdictions in Canada and if you're a family that earns, say, $120,000, there's not that much left once you've paid [your taxes]," he said.

"To come up with a bill of $2,000 or $3,000, that's a lot considering that what [the Liberals]were promoting was not to have those fees increased more than the rate of inflation."

This year, what the government collects in extra feeswill generate $153 million. That brings the parentalcontribution to almost 20 per cent of the totalcost of a spot at a subsidized daycare.

As of Jan.1, the base ratewas increasedto $7.55 per day. The government has a right to increase those fees, to bring themin line with the cost of living.