Can I Claim My In Home Child Care Provider on Taxes?

Many in-home child care expenses are tax deductible.

A portion of the salary you pay an in-home child care provider may be tax deductible if you and the caregiver meet certain criteria. Only the care provided when you are working or searching for employment can be deducted from your taxes. The caregiver must be licensed and she cannot be a family member you claim as a dependent. Deductibility for child care for children over the age of 13 is generally excluded. You must be considered the custodial parent of the child to qualify for the deduction.

Determine Your Deduction

The amount of child care expenses you are eligible to deduct is based on a percentage of your adjusted gross taxable earned income and your employment costs. Do not factor Social Security, annuities, scholarships, workers’ compensation or unemployment payments into this equation. Deductible percentages range from 20 to 35 percent. The 2010 annual child care deduction limit is $3,000 for one qualified dependent or $6,000 for two or more qualified dependents. A qualified dependent is defined as an individual under the age of 13 or an older child who is mentally or physically unable to care for himself.

Deductible Expenses

Payments made to your in-home child caregiver for care provided during time you are working or looking for work is eligible for deduction. This includes salary, benefits and taxes paid on wages. Time spent transporting children to and from school and other activities or appointments is a deductible expense as well.

Non-deductible Expenses

You cannot deduct the cost of food, entertainment or outings, even if they are provided to your child by your in-home child caregiver. You can, however, deduct the cost related to the time a caregiver is spending with your child during this period. For example, you may deduct the cost of wages paid to a child care provider when she takes your child to the movies, but you may not deduct the cost of the movie or popcorn.

Live-in Care

If the individual providing in-home child care lives with you, you may deduct the associated costs including food and lodging. For example, if you have a five-bedroom home and one bedroom is used by the caregiver, the mortgage or rental costs associated with the square footage of that room is deductible, much like a home office deduction would be. Likewise, a percentage of the family food budget may be deducted as well.

Claim Your Deduction

To claim your in-home child care expense deduction, use IRS Form W-10, Dependent Care Provider's Identification and Certification. You must provide the child care provider’s name, address, Social Security number and/or tax ID number.

References

• IRS.gov: Publication 503 -- Main Content