Years ago, when I went back to work part-time after maternity leave, we cobbled together a childcare schedule that included my mom and a paid babysitter. At one point, my sister did some regular paid childcare for us, but my mom never wanted compensation. Time with her granddaughter was pure gold, and later she did the same for her grandson while his sister was in school.
Should you pay your parents if they babysit for you? Compensation can be a touchy subject for them, says Susan Newman, social psychologist and parenting expert. Many grandparents want to babysit without being paid, but what you decide will depend on your particular situation. “How old are your parents? Do they need the money? Will they provide regular childcare?” she says. If you know your mom is subsisting on Social Security, and she provides regular weekly childcare for you, it may be appropriate to insist. You’d be paying for childcare costs somewhere else if she didn’t do it, right?
Take a look at your needs
Hash out what you think your childcare needs are with your partner first, says Kayce Hodos, licensed clinical counselor with a focus on pregnancy and beyond. Are you thinking just for date nights or on-call situations when your kid is a little sniffly for daycare? What are your needs, can your parents help, and do they want to?
For incidental babysitting, you can return the favor in other ways, Newman says, because many grandparents are thrilled for the privilege. Still, you can show your appreciation with things like a gift certificate for a night away, a dinner out, or a trip to the garden nursery.
In a Reddit thread discussion of whether to pay for childcare, most commenters said grandparents didn’t want to be paid, but they were also sensitive to grandparents who couldn’t afford to take on too much unpaid care. A number of people paid their mothers if the childcare was regular. Those who didn’t pay compensated as Newman suggests with splurge-y birthday and Mother’s Day gifts, tech upgrades like a new television or smartphone, and even mortgage payments.
Whether you pay your parents or not, the Reddit discussion suggested setting an end date for regular childcare to avoid fostering family resentment. Even if you don’t, think about what you’d do if your relative bailed on you. That happened to me after a sisterly disagreement, and my husband and I had to scramble between Friday and Monday to arrange care.
So, if you’re going to pay, how much should you pay?
This will depend on your region, your parents’ financial situation, and what feels fair and affordable to everyone. In-home babysitting is more expensive than a daycare setting, so that should probably be your guide. According to SitterCity, babysitters average $17.50 per hour. Nannies can make $25, but your parents may be happy with a more affordable (to you) weekly rate.
The other thing to know is that paying a parent does have tax implications if they meet certain earning thresholds. According to IRS rules, babysitters must report their earnings on their tax return for services of $400 or more. “Because this is essentially self-employment, you don’t need to issue a 1099 form,” says Levon Galstyan, a CPA at Oak View Law Group.
Technically your mom or dad are independent contractors if they babysit at their house. But if someone babysits at yours, then they’re considered a household employee, although you don’t need to issue a W-2. You also don’t need to withhold Medicare or social security (FICA) taxes—even if you pay them more than $2,400. That’s the FICA tax threshold for a household employee who’s not your parent. But the parent should still report the income to the IRS—without a W-2—and plan to pay income tax.
However, there are few conditions that do require paying FICA taxes on wages over $2,400 to a parent babysitter. For example, if you’re widowed or divorced (not remarried) and your kids are under 18, and your mom is babysitting for you in your home. Be sure to read the IRS rules on parent household employees and FICA taxes.
Things get more complicated if you pay $2,400 or more in 2022 to your parents and you want to claim the Child and Dependent Care credit. If you decide to claim the credit, you need to furnish the IRS with your childcare provider’s information (Form W-10). If that’s your mom or dad, they’re responsible for paying 15.3% in FICA taxes when they report income of $2,400 or more.
Also, when you hit that $2,400 threshold, that triggers the household employment tax (aka nanny tax) if you plan to take the childcare credit. You’ll need to fill out IRS Form 2441.
If you don’t claim the childcare credit, then you and your parents are exempt from the nanny tax, and they don’t need to pay FICA taxes. It may be easier for everyone if you don’t take it, but that’s a decision for you to discuss with a tax accountant and your parents.
“The best way to avoid tax issues is to compensate a parent another way,” Galstyan says. “As the adult child, you can always take care of your parents financially. You could pay a large household expense and avoid tax issues.”
One last tax thing: if your mom or dad lives with you and you can show the IRS they’re a dependent, you could qualify for a $500 tax credit, Galstyan says. Check out the eligibility criteria.
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