How to Deduct a Nanny's Wages
- 1). Gather the personal information of the nanny. When requesting the credit, you must provide the nanny's name, address, and taxpayer identification number (the employer identification number if the nanny is part of a service, or the Social Security number if the nanny is an individual). If you need to request this information formally, use Form W-10, which is provided on the IRS website.
- 2). Gather all receipts related to the nanny's services. You will need these documents to support what you claim are your nanny expenses for your return.
- 3). Complete Form 2241. This form is how you will determine your tax credit. To begin the calculation of the credit you need to determine your qualifying child care expenses. You will be able to take at most $3,000 of child care expenses for one qualifying child or a maximum of $6,000 of child care expenses for two or more qualifying children, and you will record the appropriate amount on line 3. On line 8 of Form 2241, there is a table that will provide you with the appropriate multiplier based on your income. Multiplying your base amount of care expenses from line 3 by the multiplier from line 8 will yield your applicable credit.
- 4). Complete your 1040. Include the amount reflected on your Form 2241 on line 48 of your Form 1040, line 29 on your 1040A or line 46 on Form 1040NR.
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