Tax Information on Childcare Deductions on a Tax Return

Too many parents don’t claim their full tax deductions for babysitting and related childcare expenses, according to Kiplinger. In some cases, at least one parent can cut their tax liability by hundreds of dollars. However, the Internal Revenue Service requires that interested parents not only practice careful record keeping in order to qualify for such deductions but also mandates that only certain types of childcare can be deducted for tax purposes. Learning the basic qualifications associated with dependent care tax deductions might save you money as well as unnecessary tax-related drama.

Size

The allowed deduction for the care of one child is $3,000, as of 2010, according to the IRS. However, if you have more than two children, you can only claim up to $6,000 each year in dependent care expenses for tax deduction purposes.

Age Requirements

Your child must be under 12 years of age for you or your spouse to use the associated childcare expenses for tax deductions, according to the IRS. However, in some cases, children under the age of 19 may be included if they have a disability or serious illness that requires special monitoring when a parent is not at home.

Misconceptions

One of the top 10 facts you must consider when planning to deduct childcare expenses is why such expenses had to be incurred, according to the IRS. Generally, you can only deduct expenses if they were required to allow one or both parents to work or seek gainful employment; you cannot claim tax deductions for babysitting services you secured so you could go on a personal vacation or to a party.

Identification

You must identify by full name, either personal or business, the childcare provider, according to the IRS. Also, if you hired someone to come to your home to provide babysitting services, you may be considered an employer and compelled to pay taxes for that person’s Social Security benefits.

Considerations

If you or your spouse’s employer offer any type of childcare benefits, your ability to claim tax deductions may be more limited, according to the IRS. You can only deduct your actual out-of-pocket expenses for eligible child care not covered by another agency, including an employer. Also, your child must have lived with you for at least half of the tax year in order for you to be able to claim babysitting-related deductions.