“I’m a work from home mom and I hire a babysitter for meetings at home and away.I want to know if those expenses are deductible.”
Short ANSWER: YES! Keep your receipts and file them for ChildCare at tax time. In fact, you may qualify for $3,000 in tax credits for one dependent, and a maximum of $6,000 for two dependents or more.
I have been asked this numerous times during tax season and by mothers that have decided to work from home. So I figured if I placed it here, moms could verify it against what the IRS says, save me time from repeating myself and I bring more traffic to my humble blog. (Yes, who doesn’t love them THREE’fers)
Okay, so how to get the credit:
The credit has a number of technical rules. For instance, in cases involving divorce, the custodial parent can take the credit, while noncustodial parents can’t, even if they would otherwise qualify to treat the child as a dependent.
To claim the child and dependent care credit, you must meet these requirements:
- You and your spouse must usually file as married filing jointly. (See Filing Exceptions below.)
- You must provide the care so you (and your spouse, if married) can work or look for work.
- You must have some earned income. If you’re married and living together, both you and your spouse must have earned income. However, one spouse might be disabled or a full-time student at least five months of the year.
Even if you’re not married filing jointly, you and your spouse might be able to claim the credit. You must meet both of these requirements:
- You paid more than half the cost of maintaining a household for the year. Both you and the qualifying person must have used the home as your main residence for more than half the tax year.
- Your spouse wasn’t a member of the household during the last six months of the tax year.
You must provide the name, address and Taxpayer Identification Number (TIN) of the person who provided the care. The taxpayer ID number is either a Social Security number (SSN) or an Employer Identification Number (EIN). Ask your care provider for the number.- KP Tax Service
To claim a credit for qualified expenses, you must provide care for one or more qualifying persons. (See Qualified Expenses below.) Qualifying persons include:
- Dependent who’s a qualifying child and under age 13 when you provide the care. Usually, you must be able to claim the child as a dependent to receive a credit. However, an exception applies for children of divorced or separated parents. In those situations, the child is the qualifying child of the custodial parent for purposes of this credit. This applies even if the noncustodial parent claims the child as a dependent.
- Spouse or dependent of any age who’s both of these:
- Physically or mentally incapable of self-care
- Has the same main home as you do when you provide the care
Don’t forget those expenses that cover household services, such as housekeeping, while you work or search for work, also count toward the credit if the services were necessary in part for child care.-KP Tax Service
Qualified child- or dependent-care expenses are those you incur while you work or look for work. The main purpose of the expenses must be for the well-being and protection of a qualifying person.
Qualified expenses include:
- Expenses for care provided outside the home. This applies if the qualifying person regularly spends at least eight hours each day in your home.
If the qualifying person receives the care in a dependent-care center, the center must comply with all relevant state and local laws. A dependent-care center is one that cares for more than six people for a fee.
- Expenses for in-home care. This includes expenses for:
- Light housework related to the qualifying individual’s care
- The care itself
- Gross wages paid for qualified services, plus your portion of:
- Social Security
- Federal unemployment taxes
- Other payroll taxes paid on the wages
- Meals and lodging for the employee providing the services
These expenses don’t qualify for the child and dependent care credit:
- Transportation costs to and from the childcare facility
- Overnight camp expenses
- Expenses for the education of a child in kindergarten or higher
- Expenses for chauffeur or gardening services
The cost of before- or after-school programs might qualify if the program is for the care of the child. Education costs below kindergarten qualify if you can’t separate those costs from the cost of care. This includes nursery school.
The credit is equal to 20%-35% of qualified expenses. The percentage you can deduct depends on your adjusted gross income (AGI). The maximum amount of qualified expenses you’re allowed to calculate the credit is:
- $3,000 for one qualifying person
- $6,000 for two or more qualifying persons
Complete Form 2441: Child and Dependent Care Expenses and attach it to your Form 1040 to claim the credit. For more details, check out KP Tax Service. It’s mom owned and ran. With over a decade of experience.
FOR BABYSITTER/NANNYS HOUSEKEEPERS I’ll share more details on how to file your taxes and keep your business legal next week. In the mean time, here’s HOW to file your taxes-> READ THIS- HERE
Hope this helps!
Kelle, QC Supermom