Are Nanny Costs Considered Tax Deductible?

Are Nanny Costs Considered Tax Deductible?

Tax deductibles are something that everyone should know about.  If you have children, you might be wondering if your nanny costs are tax deductible.  The good news is that most child care, including nanny costs, are tax deductible, but there is additional information that you need to know about.  

The Expense Limitations 

The IRS has certain limitations regarding nanny costs that you need to be aware of as this will affect how you claim the tax deduction.  The first limitation looks at your income.  In certain tax jurisdictions, only the parent of the child with the lower net income will be able to claim this expense as a tax deduction.   

Another limitation is the fact that the nanny cannot be listed as a dependent on your tax forms.  This means that you cannot claim the money you pay to your teenager to watch the younger children as a nanny expense.  The nanny cannot be related to you or be your spouse either.   

If you are divorced or separated from the other parent, you will need to be the primary guardian of your child to claim this expense.  If you are not the primary caretaker of the child, nanny costs will not be tax deductible.  You also need to have the correct filing status to qualify for this tax deduction.   

The reason for nanny costs will also be taken into account with your taxes.  The expense will need to be for the sake of employment.  If you’re living in Miami, FL, this means that you need to find Miami nannies because you are in work, attending a school or otherwise attempting to earn a living.  To qualify for this deduction, you and your partner will need to have earned income during the year.  

Special Circumstances 

There are certain exceptions to the general rules that you also need to know about.  These exceptions allow people who would otherwise not qualify to take advantage of the tax deduction.  The first of these exceptions is the age of the child you have a nanny for.  

Generally, your child will need to be under the age of 13 or disabled for you to qualify for a tax deduction.  An exception to this will be if you have an adult child, over the age of 18, who is disabled.  They will need to be a declared dependent, but you will still be able to claim care expenses.  

If your spouse or partner is disabled, the requirement for both parents to earn an income in waived.  The only issue with this exception is that only permanent and total disabilities that stop the person from finding sustainable employment will count.  In some states, you will need to receive disability payments from the government to apply for the tax deduction under this exception.  In other states, you may need to have a written statement from a doctor certifying the disability.   

Most childcare expenses are tax deductible, but you will need to know what the limitations and exceptions are.  Not all parents will qualify for these deductions and not all expenses will be considered tax deductible.