Involving grandparents in childcare can lead to tax deductions.
If you claim childcare expenses in your tax return, you'll pay less tax. This applies not only to childminders, daycare centers, or babysitters but also to grandparents taking care of their grandchildren in exchange for payment. The German Taxpayers' Association explains the rules.
Here's what you need to know:
Not limited to professionals:
Grandparents looking after grandchildren can also reduce your tax burden. If they receive money for it, the costs can be deducted under the "Child" section of your tax return. The crucial factor is that they don't live in your household. The children must belong to your household and be either your first-degree children or foster children. They mustn't be older than 14, unless they're disabled, in which case they can be under 25.
Draw up a contract:
Draw up a care contract with the grandparents, similar to one you'd create with a stranger. This agreement should include their name, address, hourly wage, and the duration of the care. Both parties should sign it.
Prove your payments:
You need to prove the payments to the tax office. This is because undocumented childcare costs may be rejected. You can make this easier by transferring the money with an appropriate reference.
Cover your travel costs:
Grandparents look after the child free of charge? No problem! You can pay them travel expenses. These are tax-deductible, too. However, if they're reimbursed, they should issue a receipt. Alternatively, you can apply a flat rate of 30 cents per kilometer. In this case, the shortest possible outward and return journey applies.
Keep an eye on the limit:
Only two-thirds of childcare costs and a maximum of 4000 euros per year and child get taken into account for tax purposes. So, only the sum of all childcare costs up to this limit lowers your tax liability.
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Source: www.ntv.de
