{"id":65,"date":"2025-12-05T21:09:55","date_gmt":"2025-12-05T21:09:55","guid":{"rendered":"https:\/\/s37407.p1377.sites.pressdns.com\/homepay\/tax-breaks-and-credits-for-families-hiring-a-nanny\/"},"modified":"2025-12-05T21:10:00","modified_gmt":"2025-12-05T21:10:00","slug":"nanny-tax-breaks-and-deductions","status":"publish","type":"post","link":"https:\/\/www.care.com\/hp\/nanny-tax-breaks-and-deductions\/","title":{"rendered":"Tax breaks and credits for families hiring a nanny"},"content":{"rendered":"

One of the most common concerns families have when they hire a nanny is how much in taxes they’ll be responsible for paying. The good news is that families can qualify for at least one — if not two — tax breaks that can make paying their nanny on the books less expensive than paying under the table.<\/p>

What tax breaks are available when I pay my nanny legally?<\/strong><\/h2>

Dependent Care Account<\/h3>

A Dependent Care Account<\/a> is a type of Flexible Spending Account (FSA) which is available through the benefits package offered by most companies. You can use an FSA to pay for up to $7,500 of child-care-related expenses — such as your nanny’s pay — using pre-tax dollars. Depending on your marginal tax rate, using an FSA can save around $3,000 in 2026. For enrollment details, check with your HR or Accounting Department.<\/p>

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Child or Dependent Care Tax Credit<\/h3>

To apply for the Child or Dependent Care Tax Credit<\/a>, use IRS Form 2441<\/a> to itemize care-related expenses on your federal income tax return. A majority of families will receive a tax credit ranging from 20-35% on up to $3,000 of care-related expenses if you have one child, or $6,000 of care-related expenses if you have two or more children. This means your tax credit is up to $1,050 for one child and $2,100 for two or more children.<\/p>

How can I maximize my savings using child care tax breaks?<\/strong><\/h2>

Your best option is the FSA. Setting aside the full $7,500 will save about $3,000, depending on your marginal tax rate. If you don’t have access to an FSA (or cannot enroll at the moment), use the Child or Dependent Care Tax Credit.
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How do I qualify for a nanny tax deduction?<\/strong><\/h2>

“The most important thing to remember is that you can’t qualify for a tax break on your child care expenses if you aren’t paying your nanny legally,” says Tom Breedlove, Sr. Director of Care.com HomePay<\/a>. <\/p>

Assuming this is not an issue, these tax breaks are available to you if your children are under the age of 13 and you have care-related expenses because both you and your spouse work, are looking for work or are full-time students. Child care expenses can be your nanny’s wages, the wages paid to a backup child care provider, the taxes your incur on your nanny’s wages and even the money paid to a placement agency. <\/p>

When you sign up for Care.com HomePay<\/a>, the paystubs we generate for you can serve as proof of child care expenses. This will allow you to use your FSA and\/or keep track of how much to apply to the child care tax credit.<\/p>

Next Steps:<\/strong><\/p>