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?