If you ponied up for a nanny in 2018, you just might be eligible for a tax credit next year — as long as you aren’t paying him or her under the table.
The Tax Cuts and Jobs Act overhauled tax planning for many filers, including families: The standard deduction went up to $12,000 for singles ($24,000 for married couples), personal and dependent exemptions disappeared and certain itemized deductions have been limited.
Working parents should know that the child and dependent care tax credit remains: This is a tax break you can grab if you paid for day care, summer camp or a sitter.
You may qualify for a credit of up to $1,050 for a child under age 13 ($2,100 for two or more kids).
The catch: If you’re hoping to grab this break, you can’t be paying your nanny off the books. You’re supposed to pay your care provider legally and remit the appropriate employment taxes.
“In general, the nanny tax is paid as part of your tax return,” said Tim Steffen, director of advanced planning at Robert W. Baird, a wealth management firm.
“The IRS may not know that you have a nanny at this point until you file your return in April,” he said.
Here’s how to clean up your act and get that credit.
Source : CNBC
