How to Claim Child Care Income on Taxes

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A father working on his laptop at the dining room table.
A father working on his laptop at the dining room table. (Image: David Pereiras Villagrá/iStock/Getty Images)

How you claim child care income on your taxes varies based on your specific role and the type of business you work for. Babysitters generally report income on schedule C. Child care center employees and nannies will receive W-2s and report child care income as wages. Child care business owners report child care income as business income on the business tax return.

Babysitter Income

Babysitters are child care workers who care for children for a few hours at a time. Most babysitters are paid an hourly rate and paid cash by parents. Babysitters rarely, if ever, receive any tax forms indicating their annual income. As of 2015, you didn't have to file an income tax return if you're single, under 65 and your income is less than $10,150 and you can't be claimed as a dependent on another person's tax return; if someone else, like your parents, claims you as a dependent, the threshold for filing is $6,200 in earned income. Babysitters who work for profit and exceed the income limit should record all cash payments and expenses on schedule C of Form 1040. Babysitters that babysit as a favor to family or as a hobby rather than for profit and must file can report earnings as hobby income on the "Other Income" section of Form 1040.

Taxes for Nannies

In comparison to a babysitter, a nanny is more invested in a child's life and development. Nannies work for longer periods of time on a regular schedule, like during the day while parents are at work. The IRS considers nannies to be household employees and requires that parents pay them as employees. Nannies will receive a Form W-2 each year and can enter wages in line 7 of Form 1040.

Child Care Center Workers

Day care and child care center workers work for a business that provides child care during the day, on weekends, after-school or in the summers. Daycare workers can be full-time, part-time or seasonal and are usually classified as employees. If you receive a Form W-2 at the end of the year, you are considered an employee and should report your wages on line 7 of Form 1040.

Child Care Center Business Owner

Day cares and child care centers can be organized as any type of business entity, including a sole proprietorship, partnership, S corporation or C corporation. For business owners, child care income is considered business income. With the exception of sole proprietors, who use Schedule C, business owners must report child care income and expenses on the business tax return form. Partnerships use Form 1165, S corporations use Form 1120S and C corporations report on Form 1120.

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