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How do we claim day care on our taxes?

I pay cash to my mother in law to watch my kids for day care. Can I still claim this on my taxes?

  • Every month I pay $895 to my mother in law to watch my 2 kids while I am at work. She does not own a child care, etc. So how can I claim this money on my taxes? Last year when they were at a child care I was able to use this as a deduction...is it still possible?

  • Answer:

    You can claim this in the same manner as your would if you were paying a child care business. You would use IRS form 2441 to make this claim. You will need her name, SS# and the address where she cares for the children. You may need to have some sort of proof that you really paid her, such as a signed receipt. She in turn will need to claim the amount paid as income.

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Sure. And she is legally required to claim it as income on HER tax return, whether you take a child care credit or not.

Judy

If she babysat in YOUR home, you give her a W-2 and she reports it on 1040, 1040A or 1040EZ. if she babysay in HER home, she files 1040 with schedule C-EZ and pays self-employment taxes. PS, start paying with checks, as the IRS needs proof money changed hands.

Quick Answers

To claim a deduction, you must be paying market rates in an "arm's length transaction" - as if you were independent, unrelated, parties. Give her a 1099 regarding her income, and she has to declare the income and pay income taxes, Social Security, etc. This is if she qualifies as an independent contractor, working on her premises, and can/does take in additional children, etc. If she is coming to your home and working for you on a regular basis, you have to pay her Social Security & Medicare taxes, remit withholding for income taxes to state & federal tax authorities, pay unemployment insurance premiums to the state, etc. The only way you can deduct the expense is if the recipient business, independent contractor or employee is reporting the income and paying all appropriate taxes. Oh, yes, you also need proper receipts to deduct it!

ibu guru

is she doing this in your home? if so this is called the nanny tax and you file a Sch H with your tax return next year, paying the FICA taxes, issue her a W-2 and you claim the expense on your 2441 and this is if you have paid her at least $1700 thru the year, which would only be two payments for you if she is not doing in your home, issue her a 1099 at year's end, you still claim child care credit, she files a Sch C and SE with her tax return

tro

Where is the care provided? If in your home you must treat her as an employee and give her a W-2. If in her home, she must report the income on Sch C. In many states she need not be licensed to keep grandchildren but an unlicensed provider cannot claim many of the deductions a formal daycare is allowed. If you claim the credit, you need to provide her name, SS# and address on your tax return. This is so IRS can cross-check to be sure she is reporting the income.

Sharon T

And if it takes place in your home, don't forget the employer's half of Social Security and Medicare.

MadMan

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