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Deducting Daycare on taxes?

Old 02-07-2018, 10:40 AM
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Default Deducting Daycare on taxes?

I had a kid in August, so lots of new rules for me this year. Can I deduct daycare costs? If so, how do you prove the expenses. We pay her grandmother in cash to watch him 3 days a week.
Old 02-07-2018, 10:41 AM
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I believe the grandmother would have to claim the income if you try to deduct the cost.
Old 02-07-2018, 10:44 AM
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You need her SS# and address. The IRS will then use that info and match it up to make sure the provider (grandmother) is claiming on her taxes.
Old 02-07-2018, 10:45 AM
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Form 2441. Problem is they ask for the provider's social security number. Is grandma picking up the income? She could also be a household employee and would need you to issue her a w2. https://www.irs.gov/taxtopics/tc756

It gets ugly when you follow the rules.
Old 02-07-2018, 10:47 AM
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Not worth it leave grandma out of your taxes.

We had some nannies years back and never wanted to screw them by potentially deducting their pay.
Old 02-07-2018, 10:49 AM
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Originally Posted by Flatout71 View Post
Not worth its leave grandma out of your taxes.
Well that got messy in a hurry. I think this is the answer
Old 02-07-2018, 10:49 AM
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In your case, you are probably better off letting this one slide. I'm sure what you pay grandma, is WAY less than what you would pay a daycare center. Just keep this one under the table.
Old 02-07-2018, 11:02 AM
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AND, you can't deduct all of it anyway, just a percentage based on your income. It really isn't worth it.
Old 02-07-2018, 11:47 AM
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Yup. Can't claim what you pay grandma.

I had the same thing with an aunt. She took care of 4 kids during the day, but everyone paid cash.
Old 02-07-2018, 11:51 AM
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We set aside some money on the Flexible Spending account for summer day camps and swim camps...Little young now but it’ll help in a few years.
Old 02-07-2018, 11:54 AM
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Can't do it with your current setup.

My kids were in theatre camp for a few weeks this summer, it was most of the day, last week I got a statement from the camp that I used to file the deduction.
Old 02-07-2018, 11:57 AM
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Good God we need more tax code overhaul.
Old 02-07-2018, 01:02 PM
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What’s the childcare deduction for a year? We dropped the nanny in August after her second birthday and went to a daycare. Huge pay raise for us dropping from $33k/year to $19k.
Old 02-07-2018, 01:10 PM
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Originally Posted by bjm9818 View Post
What’s the childcare deduction for a year? We dropped the nanny in August after her second birthday and went to a daycare. Huge pay raise for us dropping from $33k/year to $19k.
I think it is $3k or 6 for two or more, but only a portion allowed dashed on income. I also believe the credit was doubled.

We don't use it anymore and I don't recall the nuances but the forms instructions and the form itself is pretty straight forward
Old 02-07-2018, 01:15 PM
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When my wife was deployed, my sister helped out watching the kid. I used a DCRA (Dependent care reimbursement account) so that I could pay her with pre-tax dollars. She sent me an invoice each month for the amount we agreed, and I paid those invoices with pre-tax dollars.
Yes she had to claim it, but it was like $5k a year, so it's not like people with $5,000 annual incomes are going to pay a whole lot in taxes, but decreasing my taxable income by $5k made a difference.
Old 02-07-2018, 01:17 PM
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Isn’t it the same as a the FSA account? 2500 for individual or 5000 for a married couple.
Old 02-07-2018, 01:21 PM
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Good points on Grandma claiming the income. Also potential insurance issues running a daycare business in your home, or zoning.

Lastly, you should have been collecting taxes from the pay and paying them to the government.
Old 02-07-2018, 01:41 PM
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Its treated like an FSA. $5k/yr you can deduct pre-tax and they reimburse costs. So for a typical 20% effective tax rate it saves you about a grand. Or roughly a month of daycare.
Old 02-07-2018, 01:45 PM
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Originally Posted by skipperwork View Post
We set aside some money on the Flexible Spending account for summer day camps and swim camps...Little young now but it’ll help in a few years.
But don't call it camp, it has to be for childcare so you can both work. Childcare/daycare.
Old 02-07-2018, 01:49 PM
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Originally Posted by BadgerS View Post
But don't call it camp, it has to be for childcare so you can both work. Childcare/daycare.
I have to look into this since we're moving from "daycare" to pre-school next fall. But, is it really pre-school when she'll be there 3 years before she starts kindergarten???

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