The federal tax law allows individuals to deduct expenses that directly relate to the production of income. Providing babysitting services in exchange for compensation is an income-producing activity that qualifies you to deduct related expenses. However, the IRS places the burden on you to substantiate any expense you report on a tax return.
Those operating their own babysitting business are eligible to deduct certain education and out-of-pocket expenses. Mileage is also deductible for any trips associated with your babysitting duties.
The IRS allows you to deduct the cost of attending an educational program that relates to your work as a babysitter. To qualify, the course must either maintain or improve your skills in providing daycare services to children. However, you must have prior babysitting experience to claim this deduction. The tax law prohibits you from claiming a deduction for education that either prepares you for a new career in babysitting or that equips you with the minimum skill set needed to perform babysitting services. The education need not directly relate to the act of babysitting; taking a first-aid course that focuses on adolescents or prepares you to work with special-needs children will satisfy the requirement.
If babysitting duties require you to transport the children using a personal vehicle, you can deduct the actual costs you incur for the gas and oil that solely relate to your duties. When calculating costs, you cannot include your normal commute between the workplace and your home. As an alternative to maintaining records of actual costs, the IRS provides a standard mileage rate to calculate the deductible amount based on miles you drive for the benefit of your employer. For 2018, taxpayers are able to deduct 54.5 cents per mile, which is up 1 cent per mile from the previous year. Regardless of the method you choose, you can also deduct the actual cost of tolls and parking that do not relate to your normal commute to work.
Babysitters can deduct other out-of-pocket expenses they incur when they do not receive a reimbursement from the employer. The deduction covers an array of expenses that the tax code does not specifically identify. However, the expense must be for the benefit of the employer and not within the babysitter’s discretion. For example, if your employer requests you take the children to a movie and neglects to reimburse you, a deduction equal to the price of the movie tickets is permissible. However, the cost is not deductible if you make the decision to take the children to the movie.
Taxable Income Requirement
The federal government requires you to report all income on a personal tax return, regardless of its form or source. Therefore, the deductions available to babysitters are allowable only if you report your earnings from babysitting. You must include all three deductions in the miscellaneous expenses you report on the Schedule A attachment to your personal income tax return. Since miscellaneous deductions are part of your overall itemized deductions, you must be eligible to itemize to receive a tax benefit. Eligibility to itemize requires that your total potential deductions exceed the standard deduction amount for the year.