Q: My daughter gives me $3,600 a year to care for her children. She claimed this amount on the child-tax credit. Do I need to report that income and pay taxes on it?
A: Yes you do. And remember that your daughter must report your Social Security Number on the form she uses to compute her child-care credit.
Report your income on your Form 1040, line 12. You should complete Schedule C-EZ, which will permit you to deduct any expenses you have in giving the care. For example, deduct auto mileage to your daughter's home at 48.5 cents per mile if you go there to give the care.
This is self-employment income, so you must also complete Schedule SE, which calculates the Social Security and Medicare taxes you must pay on your net income from providing child care.
These questions are actual inquiries submitted by taxpayers to our AARP Tax-Aide Program. The AARP Tax-Aide Program is a volunteer-run, free tax-preparation and assistance program offered to low- and middle-income taxpayers with special attention to those age 60 and older. Our volunteers are trained and IRS-certified to understand individual federal-tax issues. Our volunteers provide tax assistance as a public service and cannot guarantee the accuracy of the information provided.
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