There are arguments and debates about the effects of hiring a nanny to take care of your children. Some people prefer that one of the parents, often the mother, stay at home and focus on raising the children while the other spouse work and provide the financial needs of the family. Some prefer to leave their children with a relative such as the grandparents, the aunts, or the nieces. Some just cannot trust other people enough to leave their children with them. However, some people believe that it is the most logical choice if you live far away from your parents and other relatives. Some parents also need to hire a nanny or a baby sitter especially if their needs will not be covered by what one of the parents earns alone. However, they agree on one thing – you have to be very selective and thorough when choosing your nanny. But, not many people know that employing a nanny has its interesting perks.
If both you and your spouse are working, or if you are a single parent who do not have any other choice but to get a job two, you will definitely need a nanny. However, you may be surprised that hiring a nanny has its perks tax-wise too. When you hire a nanny to look after your children as you earn a living to provide your kids’ needs, you can actually deduct your nanny’s salary from your tax computations and classify it as a childcare expense. You can also hire a nanny when you conduct a research and when you enrolled to study in a school. You may have different reasons but hiring a nanny will always have the same perks.
You can actually deduct up to $7000 for each child that you hire a nanny for. The child should be aged 6 or younger. You can also deduct up to $4000 for kids aged 16 or younger, and $10000, regardless of age, for disabled children. You just need to establish that your child or children is qualified for disability tax credit. These are the respective maximum amounts that you can deduct from your annual tax computations depending on the age and the situation of the child whom you hire a nanny for.
These are definitely significant amounts of deductions to your annual tax. It is also a win-win situation as you get to have someone whom you can entrust your children to while you attend to other important matters and you also deduct what you spend on him or her from your taxes. The amount that you save from your taxes will prove useful as you can use it on your other needs.
The great thing about this is that you do not even need to consider any technicalities fore these deductions. Even when your child spends most of his or her time in school, you can still hire a nanny for him or her. Still, the money that you pay for the nanny’s services can be deducted from your tax computations.
Those who can benefit from these deductions include employment, taxable bursaries, research grants, income from self-employment, and fellowships. These are the people who are earning relatively low income so these deductions will definitely be a great help for them. Now, hiring a nanny or a babysitter is not limited to the rich people anymore.
Here are the expenses that are related to hiring a nanny that you can include in the deduction as follows:
Wages: The main item to include is your nanny’s salary. This refers to your nanny’s basic take-home pay.
Pension Plan Contribution: It is mandatory that you contribute to your nanny’s pension plan. Aside from being a way to express gratitude for your nanny’s services, your contributions may also be included in the deduction. You can also include insurance payments.
Transportation: There are cases wherein the nanny comes from a different place, a different country, even. In such cases, the employer can pay for the nanny’s transportation expenses. Then, the employer can include the transportation expenses to the tax deductions. Also, bus passes and maybe even the family car expenses.
Interim Healthcare: Payments made for this insurance is also qualified for the deduction. This is basically your responsible as the nanny’s employer and you are not allowed to deduct any amount from your nanny’s salary to cover this. Therefore, you can include this in the deduction. This will help make sure that your nanny is well-taken care of and is in his or her best health condition to take care of your little bundles of joy. It is beneficial for the nanny or the babysitter for you as an employer and taxpayer and for your children. For further information go to British Columbia Ministry of Health.
Advertising Expenses: When you realize that you need a nanny or a babysitter will most likely ask around or post an advertisement to find one. Then you will go through the basic process of employment. You will ask for resumes and references, you will conduct interviews, and you will evaluate the results of these processes until you have narrowed down the list of qualified candidates and eventually, choose which one to hire. You are covered right from the very beginning. You can also deduct the amount that you spend on advertising for a nanny or a babysitter. If you ever decided to avail employment agency services, then you can also deduct the money that you spend on it.
Whenever you hire house help or anyone to work and help inside your home, and he or she works for 24 hours or more in a week, then you have the responsibility to register to WorkSafe BC or Workplace and Safety Insurance Board as an employer of domestic workers. The money that you spend on your nannies is considered as valid childcare expenses. These expenses are recurring so you can definitely add these to your annual tax deductions. This will encourage positive economic activities as more people will be encouraged to hire nannies or babysitters. That will provide more job opportunities. This is yet another good reason to hire a nanny or a babysitter.
Note: Government rules and taxes are constantly changing so talk with your accountant for the best tax strategy for you and your family.
Filipino Home Caregiver will soon be offering the services of our accounting office for Nanny / Home Caregiver Payroll and tax services.