Has paying for day care left you with that “can’t afford a housekeeper” feeling? You’re not alone. All across the country working parents struggle to deal with expensive child care options while juggling the daily stuff of living. It’s exhausting. But did you know that the cost of a housekeeper might qualify you to receive the child and dependent care tax credit?
The child and dependent care credit is available to parents who hire a care provider in order to earn a living. For instance, single parents and dual-earner couples can both claim the credit for day care or babysitting costs, but a family with a stay-at-home parent cannot.
The credit is calculated as a percentage of care expenses, and it can be as much as $3,000 for one child or $6,000 for two or more. It also applies to the cost of care that you provide for adult dependents who are physically or mentally unable to care for themselves.
How does the housekeeper fit in? According to the IRS, the cost of a household employee, like a maid or a cook, counts as a child care expense if your household employee also happens to keep an eye on your children or other dependents. For instance, you can hire a housekeeper to drive you to work in the morning, drop the kids off at school and pick them up, clean the house and watch the kids until you get home. The housekeeper’s wages will all count as child care expenses, even though some of her activities are not directly related to the children. Furthermore, you can count the cost of providing her meals as childcare expenses. If you give her a place to sleep (may we all be so lucky), you can even include the cost of the extra rent and utilities. Finally, if you pay taxes on her wages, those count as child care expenses too.
Of course, like any tax perk, this one isn’t strictly roses and sunshine. For instance, you won’t qualify for the credit if you hire your spouse or one of your own children who is under the age of 19. In addition, if you hire your housekeeper directly, rather than through an agency, you must be sure that she is self-employed and has her own small business. If not, the IRS will ask you to pay employment taxes on her wages.
If you’ve been wishing for a housekeeper, you may be closer than you think. By hiring someone who can both clean the house and keep an eye on the kids, you’ll be getting two for the price of one. Not to mention that the government will throw in a child care credit. Now that’s a working parent’s dream come true.
Interested in more tax advice? Check out our complete archive of Daily Deductions.
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