Tax Deduction for a Nanny

Payments made to your nanny may be a deductible childcare expense.
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If you hire a nanny for your children, you may be able to write off some of the costs and save money at tax time. You get a tax credit for childcare costs if the expense is necessary for you to work or to seek employment. The credit comes off your taxes, rather than off your taxable income. The Internal Revenue Service details the qualifying requirements in Publication 503.

Requirements to Qualify

You can only take the childcare credit if you have earned income for the tax year. If you're married, you and your spouse must both need the nanny's services to work or look for work. The children being cared for must be 12 or younger. The nanny can't be your spouse, a dependent or a child under 19 -- there's no deduction for a big brother babysitting his little sister, even if you pay him.

Claiming the Credit

If you earn $15,000 or less, you can claim up to 35 percent of qualified childcare expenses for your credit. The more you make, the less you write off. The maximum qualifying expense is $3,000 for one child or $6,000 for more than one. If, say, you earn $14,000 a year and paid a nanny $1,500 to care for your child, your credit would be $525. Publication 503 provides the details for figuring your exact credit size.

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