@rb1997 wrote:
So my in-laws watch my kids at their house. We pay them $125 per week to help us out.
Obviously we can claim the child care expense. How does this effect their taxes?
How much would they end up paying in taxes? It would be $6500 for the year.
This is their only form of income besides social security.
Thanks,
You don't need to issue them any tax paperwork, but if you want to claim the credit, you will have to enter one or both of their names and SSNs on your return as the caregiver. (Pick one of them, making it both just makes it more complicated for them.)
On their end, the person you name must report self-employment income on schedule C. They have the option of deducting a portion of their household expenses (food, utilities, etc.) as "business" expenses related to the business of providing child care. They will pay self-employment tax on the net profit after expenses, about 15%, so $975 or less. If this is their only income besides social security, they won't pay income tax on this money, and it won't make their social security taxable.
