Daycare Tax Tips

Wife earned $1,325 caring for children in 2008

How does the couple report this income on their tax return?

The husband of a family child care provider writes:

> My wife started babysitting in 2008. She works out of our home, the kids are dropped off and picked up by their parents at our home. She baby sits for two separate families, they each have two children under 5 years old, and they are here at different times of the day. Her total income was $1325. This is her only job. How do I report this on our 1040? We file MFJ.

Filing a tax return for a self-employed child care provider is actually pretty complicated. I hope that perhaps you have perused some of the information on my website, including my Letter to New Providers.

Pay particular attention to the publications and training available from Tom Copeland. He publishes a Family Child Care Tax Workbook and Organizer every year for child care providers interested in preparing their own tax return.

There is a lot to learn on this topic, but the short answer to your question is that you should add a Schedule C business form to your joint tax return. That's where your wife's income and expenses should be reported. You can also use Form 8829 to deduct a percentage of your home expenses, but only if your wife is properly licensed (or in the process of getting licensed) according to your local laws. By the time your wife deducts expenses (food, supplies, etc.) from her income of $1,325, she may not have any income left to tax.

Last updated 19 May 2011

Posted on 2009-04-17 18:33:05