If you or your child is working as a babysitter, you’ll need to pay taxes on that income. If you’ve hired a babysitter, you may have to report or withhold their taxes.
Are babysitters employees or independent contractors?
Babysitters can be either employees or independent contractors.
- A babysitter who only works for a single family on occasion, such as for nights out, is typically an independent contractor. Independent contractor babysitters also typically have more than one client and may not be available if someone else already booked them.
- A babysitter with a regular schedule, such as every day after school or Tuesdays and Thursdays every week, is typically a household employee.
- A babysitter who works for an app or agency may be an employee or independent contractor. Some agencies only do scheduling, and their babysitters are contractors. Other agencies provide training and have set guidelines to follow, so those babysitters are employees.
Do you get a 1099 form or W-2 for your employment income?
If you work as an independent contractor, you may get a 1099-NEC or 1099-K if you worked through an agency, app, or other service. Parents generally don’t need to issue 1099s to an independent contractor babysitter, because the parents are paying a personal rather than business expense. Your income is taxable whether or not you get a 1099.
If you work as an employee, you should almost always get a W-2. Even families with households need to issue a W-2. That’s because the IRS needs a record of what taxes were withheld.
Both 1099s and W-2s are usually due on January 31st.
How to Report Babysitting Income
If you receive a W-2 as a babysitter, add it to your tax return like any other job.
If you receive a 1099, you’ll need to complete a Schedule C as part of your Form 1040 Individual Tax Return. Don’t forget to add your business deductions (more below).
How do taxes work for household employees?
A babysitter who is a household employee will file a tax return using their W-2. Employees don’t qualify to deduct work expenses.
The person hiring a babysitter must pay the household employment tax or nanny tax (see IRS Publication 926). The general steps for paying nanny tax are:
- Get an Employer Identification Number.
- File Schedule H with your Form 1040 when you file your tax return.
- Give your employee a copy of their W-2 by January 31st each tax year.
- Withhold and pay Social Security and Medicare taxes on behalf of the babysitter if you pay them more than $2,300 (in 2021, increases for inflation most years). This does not apply to your spouse, your child who is under 21, your parent, or a babysitter who is both under 18 and a student.
- Pay federal unemployment taxes if you pay a babysitter more than $1,000 in a year. This does not apply to your spouse, your child who is under 21, or your parent.
If you’re hiring a babysitter as a household employee and don’t want to deal with all that, you can use a service like HomePay to avoid being a household employer. For a small monthly fee, HomePay takes care of setting up direct deposit for your babysitter, withholding taxes, and preparing the needed tax forms. All you need to do is say when your babysitter worked and have your new babysitter sign up to get paid and give their tax info.
How much does a babysitter make?
The average rate for a babysitter in most states falls between $13 and $18 per hour. Rates may be higher in high-cost-of-living areas, if the babysitter provides special services like tutoring, or if the babysitter is just plain good. How much a babysitter makes per year varies widely based on how much work they take on.
What counts as taxable income?
Everything a babysitter makes counts as taxable income including both their agreed rate and any tips. It is not possible to give a babysitter a cash gift to avoid taxes. Gifts given because of services performed are considered a tip.
If you’re an independent contractor, don’t subtract your expenses when reporting your income. Report your gross income. You will fill in your deductions separately.
What taxes do babysitters pay?
All babysitters will pay federal income taxes based on their tax bracket. State income taxes may also apply.
Employee babysitters should have their Social Security and Medicare taxes withheld as described above. If your employer doesn’t withhold your share of these taxes, you will need to pay 7.65% for these taxes when you file your return.
Independent contractors are responsible for their own Social Security and Medicare taxes. Contractors pay 15.3% because they pay both the employer’s and employee’s share of these taxes. Contractors can deduct one-half of their self-employment taxes on their income tax return.
Tip: Reporting all of your income helps to increase your retirement benefits from the Social Security Administration.
What tax deductions can babysitters take?
Employee babysitters generally can’t deduct business expenses since 2018.
Independent contractor babysitters can deduct expenses like what you paid to advertise, payment processing services, and other expenses you have in your business. You can deduct mileage when you’re driving between babysitting jobs or taking the kids you’re watching somewhere. You generally can’t deduct mileage to and from home since driving to and from your job is a nondeductible commuting expense. You will also usually get an automatic 20% deduction from the Qualified Business Income deduction.
Babysitting income is earned income that qualifies for retirement savings. Both employees and independent contractors can contribute to a Traditional or Roth IRA. Self-employed babysitters can also open up a SEP IRA if they want to save even more.
What is the business tax code for a babysitter?
If you’re a babysitter, the IRS will ask you to enter a business tax code. This helps their statistics but doesn’t change your taxes. You can enter 812900 — Other personal services.
When are babysitter taxes due?
Babysitters file their income tax returns by April 15th like everyone else. Independent contractors also need to make quarterly tax payments if they will owe more than $1,000 in taxes. You can learn more about estimated taxes here.
How can you keep track of your income and expenses?
There are a number of inexpensive apps that automatically track your income and your expenses. You can also get an app that automatically tracks your mileage.
How do you file your taxes?
It’s easy to do your taxes yourself if you keep good records. DIY tax software will guide you through everything you need to know. There are several tax filing services that you can use.