Two issues. First, yes he has to report that bartering income on Sch C. Second, if audited you would have to show the IRS that you actually paid for the child care which might be problematic in your situation. Your arrangement might also not pass the “smell test” in that you are receiving less rent, thereby reducing your taxable income and at the same time using that phantom income to get a credit- -double dipping. It would be cleaner to just pay him directly for child care and he could then use that income to help pay for the rent.
