Thursday, January 13, 2011

Nanny Tax Deductions

Don't Overlook Tax Deductions

Take your time when preparing your taxes. Don't miss simple tax deductions. Here are some. If we forgot some, please let us know what we have missed in comments below.

Student Loan Interest Paid by Your Parents
Generally, you can only deduct mortgage or student-loan interest if you are legally required to repay the debt. But if parents pay back a child’s student loans, the IRS treats the money as if it was given to the child, who then paid the debt.

American Opportunity Credit
This tax credit, which has been extended through 2012, is available for up to $2,500 of college tuition and related expenses paid during the year. The full credit is available to individuals whose modified adjusted gross income is $80,000 or less ($160,000 or less for married couples filing a joint return).

Moving Expenses for Your First Job
To qualify for this deduction, your first job must be at least 50-miles away from your old home. If you qualify, you can deduct the cost of getting yourself and your household goods to the new area, including 16 ½ cents per mile for driving your own vehicle for a 2010 move, plus parking fees and tolls.

Medical Bills, Prescription Costs, and Dental Expenses
If you've paid for qualifying medical and dental expenses that are in excess of 7.5% of you Adjusted Gross Income, then you can deduct the amount in excess of that 7.5%. Please refer to IRS Publication 502: Medical Expenses.

Any Health Insurance Premiums You Pay,
including some long-term-care premiums based on your age, are potentially deductible. But you have to add these to your medical expense pot. Medical expenses have to exceed 7.5% of your adjusted gross income (AGI) before they give you any tax benefit.

Out-of-Pocket Charitable Contributions
Read the directions carefully about what you can deduct and the proof you will need when donating to charity. If you've made gifts by check then you have an automatic paper trail. If you're going to deduct that truck full of clothes you've donated, then make sure you get a receipt and an estimated value from the organization to which you donated the clothing.

Work Uniforms
You don't often see nannies wearing uniforms these days in America, but some nannies do. If the parents have you purchase the uniform or clothing you are required to wear to work, you may be able to deduct those costs from your income.

Costs Associated with Preparing Your Income Taxes
This includes: software, professional advice, and filing fees. If you hire a legal professional to help prepare your taxes you can deduct those costs.

Casualty and Theft Losses
You can deduct the amount not covered by auto or homeowner's insurance.

What have we forgotten? What expenses have you been able to deduct from your taxes?


Anonymous said...

Good to know. Personally I wish they'd stop making pay my taxes since most nannies don't I don't see why I have to. But my boss is an attorney he worries. I didn't even get my bonus in cash. They made me add it to my taxes. :(

Polly Psi said...

Deduct unreimbursed vehicle mileage if the vehicle is used for work duties. Keep a diary of mileage, date and reason for use.
If you do not declare and pay taxes, both employee and employer are lawbreakers.

Anonymous said...

Can a nanny deduct job search costs? If so what ones?
Cost of coping nanny portfolio?
Travel costs to interviews?
Cost of interview clothing?
Phone calls?

Polly Psi said...

Unless a specific uniform is required, clothes are not deductible. All other job-search related cost are generally deductible, including travel costs, but keep meticulous records.

Anonymous said...

It is crazy that nannies can complain about their jobs yet not fulfill their citizenship duties and pay taxes. If you don't pay taxes you shouldn't even consider yourself an American. You should be ashamed. And guess what, you'll only reap the same rewards of illegal aliens if you don't pay taxes. You don't fulfill the basic respect of a citizen then screw off and don't complain. You don't deserve to have your potholes filled in the roads you drive on, or the bridges fixed that you cross, or your kids to attend school because you are making others pay for those priveledges and you don't! The military protects you but you don't support them!!

Anonymous said...

Our live-in nanny (19) is required to wear a uniform.

*Black pants with a red button shirt for ordinary days
*White blouse and black skirt for spcial events (like parties)

She also has to wear a name tag. Apron shall be worn when doing dirty work. I know she doesn't like it, but she has accepted the employment here, just like a waitress or whatever has to wear a uniform.


Anonymous said...

Wow Emilia you sound absolutely crazy

Anonymous said...

Emilia- Who in their right mind would many their LIVE-IN NANNY wear a name tag. You should know her name. She is one of your employees in your HOME who cares for your CHILDREN. If I was ever told I was required to attend special events in certain attire, and a regular day caring for children dressed like I was an Arby's cashier I would decline right after the position was offered. Nut job....

Next, If your cell phone is used primarily for business calls/texts/even internet used for research for your job your bill can be deducted as well.

Anonymous said...

I'm a nanny. No, I'm an awesome nanny- college educated, mindful, musical, and to the kids...magical. I am free to dress as I am- modeling individuality and self- respect to the kids. Making your nanny wear a uniform is a form of degradation. This is the woman that is probably raising your children. I were her I would quit.

Anonymous said...

The nametag has helped a lot, with visitors understanding she's working in hour home, but not a part of our family.



Joel Walter said...

Thank you for sharing those pointers. I do agree with your point of putting some time and effort in preparing your taxes. Being lax or careless with the numbers, especially where your taxes are concerned, is never a good thing. You might get caught on some legal matters with the authorities if you put the wrong amount.

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