Child care can be costly but there are a few ways families can cut the expense of child care such as claiming the Child and Dependent Care Tax Credit when they file their personal tax returns. With an expanded credit for this filing season, it is a tax-savings opportunity not to miss.
A smart and simple way to save money on childcare – like wages paid to a nanny – is through a Dependent Care FSA offered through your employer. With many companies now holding open enrollment periods, now is the time to understand how they work and reduce your taxes.
The American Rescue Plan Act substantially enhanced the Child and Dependent Care Tax Credit renewing interest in this savings on childcare expenses. Wages paid to a nanny qualify for the credit. Here is everything a family with a nanny or other childcare needs to know about claiming this tax credit on their personal tax return.
It’s always the right thing to do, but with expanded childcare tax credits and increased contribution limits on Dependent Care FSAs through the American Rescue Plan, paying your nanny legally may now be cheaper than “under the table.”
It’s that time of year again. Here’s what you need to know if employed someone to work in your home last year and how to file your nanny taxes in 2021.
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