(Tax Guide For Parents)
As a parent, your expenses associated with babysitting might make you eligible for a tax credit or deduction.
Can you write off babysitting expenses? Parents can claim a child and dependent care credit. This gives back some of the money that you spend on childcare. It can reduce the taxes you owe by hundreds or perhaps even thousands of dollars.
Childcare costs some major money. Whether it's a daycare service, a nanny, or a babysitter. Or maybe all three! As a parent, you might already be stressing about costs, so it doesn't help when tax season comes around each year. Luckily deducting babysitting expenses from your taxes can be one way to keep some extra money in your pocket.
Can You Write Off Babysitting Expenses As A Parent?
Most childcare expenses are tax deductible, and that includes babysitters and daycare services.
However, there are some limitations on who can claim the expenses and specific circumstances surrounding them.
Let's start by covering the tax rules in the United States.
Later in this article, I'll also discuss the tax laws regarding child care expenses in Canada, Australia, and the UK. In Canada, child care expenses are handled quite similar to in the US. But in Australia and the UK, there are more restrictions on who and what qualifies as approved childcare providers.
For all other countries I suggest you check what the laws are in your area.
Babysitting Expense Limitations
Tax authorities impose some restrictions and criteria that you need to meet before you're able to claim a childcare tax credit.
Based on income. In some tax jurisdictions, only the parent with the lower net income is able to claim child care expenses.
Limits on relatives. Your babysitter also can't be listed as a dependant on your taxes. That means you can't pay your 12-year-old to babysit your younger kids and also claim them for a deduction.
In fact, if a babysitter is under 18 years old, they can't be a blood relative of yours if you want your babysitting expenses to qualify. Nor can your sitter be related by marriage or adoption.
The childcare provider also can't be your spouse or someone else dependant on you.
You must be the primary guardian. In order to deduct babysitting expenses, you need to be a parent or the main caretaker of the child.
Expenses must be incurred for the sake of employment. The childcare costs need to have been used so that you could work, look for employment, attend school, or otherwise try to earn income. You and your spouse must have both earned income for the tax year to qualify.
Your filing status. To qualify your the tax credit, your filing status needs to be single, qualifying widow or widower with a qualifying child, head of household, or filing jointly if you're married.
Age restrictions. Your child or dependent needs to be under 13 years old, or disabled. A disabled person is someone considered physically or mentally incapable of caring for themselves.
What expenses don't qualify for the tax credit? Any kind of expenses that relate to tutoring or schooling aren't qualifying expenses.
Special Circumstances With Babysitting Expenses
The IRS has several exceptions to the rules above if you qualify. These exceptions allow more families to take advantage of the credit who might otherwise be unfairly excluded.
For divorced or separated parents. The credit can be claimed by the parent who the child resides with for more days out of the year, known as the custodial parent. The custodial parent can claim this credit, even if the other parent is able to claim the child as a dependant because of a separation or divorce agreement.
Dependants over 18. You can claim the credit for a disabled adult over the age of 18, even if they don't qualify as a dependant. In some countries, they qualify even if they'd normally have too much gross income to qualify. While in other countries there may be a maximum amount of income dependants are allowed to make before you can't claim expenses for them anymore.
The United States recently reduced its personal tax deduction from $9,325 in 2017 down to $0 in 2018. This has some major implications for dependants and may mean that a dependent can't make any income at all during a year if you want their expenses to qualify. Although there is still some debate if this will be the case or not.
Disabled spouses. If your spouse is disabled, the requirement for both parents to have earned income during the year is waived.
What type of disabilities is severe enough to count? It needs to be a permanent and total disability, either physical or mental, that prevents you from substantial gainful employment (being able to get a job.) In some places, you must also receive disability payments from the government to qualify for the credit, or you might need to have a written statement from a physician certifying that you're severely disabled.
Student spouses. The requirement to earn income is also waived if your spouse was a full-time student attending college or university for at least five months of the year.
In the eyes of the IRS, they've earned income for every month they were enrolled as a full-time student. So even though the tax credit is geared toward working parents, full-time students or unemployed people actively looking for jobs can still qualify.
This is true whether your spouse lives at home while attending school, or has to live in another city to attend post-secondary education.
If your spouse is hospitalized or in jail. You can claim babysitting expenses on your tax return if your partner has a health condition that has constrained them to the hospital, or if they're in jail. Or basically, any other valid case where your partner isn't around to help raise the kids.
Day camps. A camp centered around an activity or sport qualifies for the tax credit if parents were at work while the child was at camp. But any camp where the child stays overnight doesn't qualify.
Logically this makes sense. A day camp is similar to having a babysitter or daycare to take care of your child while you're working. An overnight camp, on the other hand, is still giving parents a break from their kids during hours that they wouldn't normally be working themselves.
How Much Can I Claim?
If your child is under 13 years of age or a disabled dependent, you can claim a tax credit of up to 35% of your qualifying expenses.
A qualifying expense is a care provider like a daycare center, summer camp, or babysitter.
The maximum limit you can claim is 35% of your expenses up to $3,000 for one child. Or 35% up to $6,000 if you've got two or more children or dependants.
That means your child care tax credit won't cover the majority of the costs you pay for childcare, but it's still a nice reduction in the amount of tax you might owe otherwise.
What's The Difference Between A Tax Credit And A Tax Deduction?
Childcare expenses are listed on your tax return as a tax credit rather than a tax deduction. But what's the difference?
A tax deduction reduces the overall income that you need to pay tax on. So say you're in a 20% tax bracket and claim a $1,000 deduction. That might only reduce your tax bill by $200.
A tax credit reduces your taxes directly. It's calculated and deducted dollar for dollar after an initial amount of taxes owing are calculated from your income. So a $1,000 tax credit means you owe $1,000 less taxes.
You can claim the childcare tax credit at any income level. Some other credits aren't available to people with high incomes. While the childcare tax credit does decrease at higher incomes, it never goes away completely. So you might not get the full benefit, but you'll still get something.
The childcare tax credit is non-refundable. That means you need to have a taxable income high enough to deduct from (offset) to use it. If your taxes owing are reduced for the year, you can't get the remainder back as a tax refund.
What Information Do I Need To Get The Tax Credit?
In order for your babysitting expenses to qualify, you'll need to provide the babysitter's name and address. As well as their taxpayer identification number (TIN) which can be either a social security number (SSN) or an employer identification number (EIN.)
You should save your receipts (and be make sure to get your babysitter to issue your receipts in the first place!) since you might be asked to show proof of your expenses if you ever get audited.
Your babysitter can hand write receipts for you if they don't have access to anything else. The only really important information you'll need is the date, the amount paid, their signature, and perhaps a short description of the services offered. If your sitter is a bit more tech savvy, they might be willing to make a quick invoice for you in Microsoft Excel and email you a copy for your digital records.
Can I Deduct Child Care Expenses if I Pay the Babysitter Cash?
Yes, you can claim your childcare expenses whether you pay your babysitter using cash, check, bank transfers, or any other payment method. As long as you have proof that the expenses are for childcare.
Keeping accurate records of your transactions is especially important when paying cash to your babysitter since there won't automatically be a paper trail or bank records like other payment methods.
The same rules apply regarding who can babysit for you, which disqualifies spouses, your other children, or other relatives. You'll need to provide their social security number on your tax return, so there's no way around this even if you're paying cash.
If My Employer Gives Me Money For Childcare Expenses, Can I Still Deduct Them?
No. If your employer gives you money to pay child care expenses, you'll need to subtract any money you get from the expenses you claim. But this method actually might save you more money.
If you can have childcare costs deducted from your paycheck as "pre-tax" dollars before taxes are calculated, you'll probably save more money than you would have by paying yourself and claiming the credit. If you're interested, check with your company's human resources department and see if something like that is possible for you.
This is typically called a flexible spending account. You let your employer know how much you need to pay for childcare expenses. They deduct that amount from your pay so that the account is funded using pre-tax contributions. It also has the added benefit of reducing social security, Medicare, and other paycheck taxes, since the total amount of your pay is reduced.
The IRS still requires you to reduce the expenses you claimed by any benefits your employer gave you though. So if your employer pays for the cost of your child's daycare, you can't also claim that amount as a credit.
There is a bit of an exception, however. You might be able to claim both forms of tax benefits if your total expenses for the year were more than $5,000, which is the maximum limit on an FSA (flexible spending account.)
Babysitting Expenses In Canada
The requirements for claiming a child care expense on your taxes in Canada is pretty similar to those discussed for the United States above. You need to pay for childcare so you can go to work or school. You can't claim babysitting expenses that you incur just to go see a movie on Friday night or similar situations. The requirements for claiming a babysitting expense in Canada can be a little different from the US standards though.
In Canada, your child must be younger than 16 years of age and dependant on you.
Your child's income also can't exceed the personal allowance amount, which is $11,809 for 2018. So if your child is some kind of famous actor or entrepreneur that's earning big money, you won't be able to deduct their childcare expenses.
Like in the US, a disabled dependent can be claimed regardless of their age.
Canadians can claim up to $8,000 for each child that's under 7 years old, and $5,000 for each child that's between 7 and 16 years old. A disabled dependant gets the separate disability tax credit.
Eligible child care expenses include day care centers, nursery schools, nannies, babysitters, and day camps.
If your kid goes to an overnight camp or boarding school, those expenses aren't completely disqualified like in the United States. However, you can only claim up to $200 per week for kids under 7 years old, $125 per week for kids between 7 and 16 years old, or $275 per week for a disabled child.
Some expenses that are ineligible include fees for clubs like Girl Scouts, paying for swimming lessons, medical or hospital expenses, transportation costs, or clothing costs. If your child is in a boarding school or sports program, you can only deduct the cost of the lodging, not the tuition portion.
If you're paying an individual person, you need to give their social insurance number to CRA (Canada Revenue Agency) along with proof of expenses in the form of receipts, similar to in the US.
Like in the US, for married couples, it's the person with the lower income that has to claim the expenses. Except for specific exceptions like medical conditions or if your spouse is a full-time student.
Babysitting Expenses In The UK
Can you deduct babysitting expenses in the UK? It's not nearly as easy or flexible as in the US or Canada.
UK taxpayers may be eligible for a working tax credit. This gives you an extra amount you can claim to help cover the cost of approved childcare.
The key term here is approved childcare.
A regular babysitter won't qualify as a form of approved childcare.
Things that are approved forms of childcare include:
Approved childminders. This is a specific certification or license that someone needs to obtain. Nannies might have it, but most babysitters won't. It requires taking an introductory course, having insurance, and paying several different fees.
Registered playschemes, nurseries, or clubs.
Home care worker employed by a registered home care agency.
So money that you pay to your average babysitter likely won't qualify for a tax credit unless they have some specific qualifications.
If you qualify for a working tax credit, the maximum amount is £175 per week for 1 child or £300 per week for more than 1 child. The maximum amount can also only be 70% of what you pay. Tax credits may also further get reduced based on your level of income.
Babysitting Expenses In Australia
Australia had a child care rebate previously, but unfortunately, this stopped on 1 July 2018. For help with childcare fees from 2 July 2018 onward, you can claim a child care subsidy though.
Under the new child care subsidy, your expenses qualify if your child is 13 years or younger, they meet the residency and immunization requirements, you're responsible for paying the child care fees, and you used an approved child care service.
The amount of child care subsidy you get depends on a number of factors like your family's income, the hourly rate cap based on the type of approved childcare you use and your child's age, and the hours of activity that you and your partner do.
What's an approved child care provider? Similar to the UK, a child care provider needs to be approved by the government of Australia before you can claim payments you make to them as expenses.
For someone to become an approved child care service, they need to apply to the DET (Department of Education and Training.) The kinds of child care services that can be approved include in-home care like babysitters and nannies, as well as center-based daycare including both occasional and long care, family day care, or outside school hours care.
Can I Claim Expenses For Other Perks I Give My Babysitter?
In addition to paying your babysitter, you probably offer them other perks too. When they babysit, you might prepare food for them in advance, or pay for them to order pizza or other food to get delivered to your home.
Maybe they can't drive yet, so you pick them up from their house and drop them off in your own car. Perhaps you even rent a movie for them or offer them all sorts of other non-monetary benefits.
Can you claim things like mileage, food costs, and other expenses related to your babysitter?
Unfortunately not. You can only deduct the cash amount that you pay to your babysitter as a childcare expense.
If you want to get around this, you might consider adding extra money to your babysitter's pay at the end of the night to reimburse your sitter instead of directly paying for a pizza yourself, for example.
Make Sure You're Getting All The Deductions You're Entitled To!
Taxes can get confusing. Along with childcare expenses, you probably have plenty of other expenses throughout the year you might be able to claim on your taxes that you aren't even aware of.
It can be worth seeing an accountant or another type of tax professional to prepare your tax return for you, or even just give it a second look and see if you missed any potential deductions.
A tax professional's services might cost up to a few hundred dollars to do your tax return. But if you've got a complex return with lots of potential expenses, their services will usually pay for themselves.
You might be able to claim babysitting expenses as tax credits, depending on where you live. But most places won't let you deduct babysitting expenses that you incurred to go see a movie or have a date with your significant other.
For tax purposes, your babysitting expenses need to be incurred for the purpose of giving you the ability to work or look for employment.
Some locations like Australia and the UK require you to use government approved childcare services, while in the United States and Canada you're pretty much free to choose whoever you like. As long as they aren't related to you, and your children are of an appropriate age.
Childcare expenses also apply to preschool, nursery school, nannies, and daycares.
Does the childcare tax credit apply to anything else?
Yes, surprisingly it applies to a lot more things than you would think. Along with babysitting and daycare, qualifying expenses include the cost of a maid, housekeeper, cleaning person, or cook who provides care for your child. Before and after school child care also qualify, as well as expenses related to a home care provider or nurse.
Can I claim my newborn baby as a dependant on my taxes?
Yes, absolutely. Even if they're born at 11:59 on December 31st of the tax year. There's a rumor or misconception that your baby has to be six months old before you can claim them on your taxes, but that simply isn't true.
That probably comes from the idea that a child normally has to live with you for at least six months for their childcare expenses to qualify. But the IRS makes an exception for children born during that tax year, and they are treated as having lived with you for the entire year.
Of course, you can't claim your baby if you put it up for adoption or foster care. You also can't claim your unborn baby on your tax return.
Can I still claim child care expenses if my child is adopted?
Yes, as long as you're the primary caregiver you can still claim child care expenses.
You can also qualify for an adoption credit if you adopt a child under 18 during the tax year. In order to qualify, your child must be a citizen or resident before December 31 of the tax year or the adoption must be finalized before that date.
Qualifying adoption expenses that you can claim include adoption fees, attorney fees, court fees, travel costs including lodging and meals away from home, and other expenses that directly relate to adopting a child.
For the 2018 tax year, the maximum adoption credit is currently $13,840 per child.
Can I deduct child support payments on my taxes?
No, because child support is considered tax neutral. The person paying it doesn't get a deduction for it, and the person receiving it doesn't have to declare it as taxable income. However, spousal support is taxable for the recipient and deductible for the person paying.
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Find a Sitter
The Perfect Gift For Your Babysitter
My book, Babysitting Business Secrets, is out now as an inexpensive ebook or full-color paperback. If your babysitter is serious about becoming the best sitter they can be, then this book is perfect for them. I reveal all my tricks and tips for first-time babysitters or experienced sitters who just want to up their game. Get your copy today!
- Matthew Taylor, Kidsit Founder