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 structure went into effect last April, but the bill for the extra amount that many parents owe for the last 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 of more than $155,000 will 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 effect last April, families will only be charged for the period from April to the end of December. That works out to about 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 daycare in Côte-des-Neiges.
He says he and his wife carefully 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 calculator to help families figure out how much extra they need to set aside, but it doesn't work for everyone.
The incomes of parents who are self-employed or on contract fluctuate.
Manon de Raad switched her two-year-old daughter Amélie from a private daycare to a publicly subsidized centre 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 CPE she 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 are at 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's Parti Québécois government created the fixed-price system for non-profit, publicly subsidized daycares in 1997, setting the fee at $5 a day.
During the 2014 election campaign, the PQ wanted to keep the system universal but 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 Québec MNA André Lamontagne, the party's economy critic.
"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 fees will generate $153 million. That brings the parental contribution to almost 20 per cent of the total cost of a spot at a subsidized daycare.
As of Jan. 1, the base rate was increased to $7.55 per day. The government has a right to increase those fees, to bring them in line with the cost of living.