Can You Write Off Babysitting on Your Taxes?
Babysitting costs are not a tax deduction, but a federal credit can help reduce your tax bill for care expenses that allow you to work or look for work.
While you cannot directly deduct babysitting expenses as a business expense, you may be able to claim the Child and Dependent Care Credit. This nonrefundable tax credit can reduce or eliminate your federal income tax liability, but you will not get any of it back as a refund beyond what you owe. The credit is designed to offset care costs for a qualifying person, which you incur so that you can work or actively look for employment.
Qualifying for the Child and Dependent Care Credit
To claim the credit, you must meet the Work-Related Expense Test, which requires that you paid for care services to enable you (and your spouse, if filing jointly) to work or look for work. If you are married, both spouses must have earned income. An exception exists if one spouse was a full-time student for at least five calendar months or was physically or mentally incapable of self-care.
The care expenses must also be for a qualifying person under the Qualifying Person Test. This is your dependent child who was under age 13 when the care was provided. The definition also includes a spouse or another dependent who lived with you for more than half the year and was physically or mentally unable to care for themselves.
Finally, you cannot claim the credit if the care provider was your spouse, the child’s parent, or anyone you claim as a dependent. You also cannot claim payments made to your own child if they are under the age of 19, regardless of whether you claim them as a dependent.
Calculating Your Credit Amount
The calculation begins with your total work-related expenses, which can include payments to a babysitter, daycare center, or a summer day camp. Costs that do not qualify include tuition for kindergarten and higher, overnight camps, or expenses not for the primary purpose of care, such as payments for lessons.
Your total creditable expenses are subject to two limits. First, there is an annual dollar limit on the amount of expenses you can use for the calculation. For your 2024 tax return, this limit is $3,000 for one qualifying person and $6,000 for two or more. Second, the expenses cannot exceed your earned income for the year; if married, they are limited to the earned income of the lower-earning spouse.
Once you determine the lesser of your actual expenses or the applicable limits, you apply a percentage to that amount to find your credit. The percentage is based on your Adjusted Gross Income (AGI). For the 2024 tax year, the rate starts at 35% for taxpayers with an AGI of $15,000 or less. The rate decreases by 1% for each $2,000 of AGI over $15,000, until it reaches 20%, which applies to an AGI of $43,000 or more.
Information and Forms Needed to Claim the Credit
To properly claim the credit, you must gather specific information about your care provider. You will need the provider’s name, address, and Taxpayer Identification Number (TIN). For an individual babysitter, this will be their Social Security Number (SSN); for a daycare center or other business, it will be their Employer Identification Number (EIN).
You will also need the name and SSN for each qualifying person for whom you paid care expenses. It is a good practice to have these details organized before you begin preparing your return.
All of this information is reported on IRS Form 2441, Child and Dependent Care Expenses. Part I of the form is where you will list the details for each care provider. Part II of the form requires you to list the information for each qualifying person.
How to File for the Credit
After completing Form 2441, you must attach it to your Form 1040, 1040-SR, or 1040-NR. The total credit amount calculated on Form 2441 is then transferred to Schedule 3 (Form 1040), which directly reduces your total tax liability. If you use tax software, it will handle these transfers automatically after you complete the Form 2441 section.