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Tax Relief and Childcare


In addition to being exempt from income tax, the income qualifies for an exemption from the USC, but is not exempt from PRSI.  The income from child minding is not taken into account for the purposes of the “Home Carers Tax Credit”.  If you qualify for this income tax exemption, the use of your home for the purposes of child minding does not impact on your entitlement for mortgage interest relief or Principal Private Residence relief for CGT purposes.

It was reported in the media recently that only 450 individuals availed of the tax exemption for child minding in 2010 and further that there are somewhere between 20,000 and 30,000 child minders in the state.  For those who did not make a return, where they could have availed of the tax exemption, they are subject to the normal penalties and measures for non-submission of income tax returns, that are best avoided.

For parents who employ child minders in their own homes, there are other considerations.  If you pay a child minder more than €40 per week you will need to register as an employer and operate PAYE on payments to that employee.  If you pay a “domestic employee” less than €40 per week, you will be able to operate under the “domestic employee” scheme.  If you employ a child minder you will also need to consider the other issues that arise in an employer employee relationship such as minimum pay, holiday, bank holiday, break and redundancy entitlements, the requirement to issue written terms and conditions of employment and payslips.

Remember that if you engage a child minder to look after your children in your home, that the Revenue will view you as an employer.  It is your responsibility, as an employer, to operate PAYE/PRSI and USC on payments made to the child minder.  The failure to register as an employer and operate the tax deductions can be extremely costly.

Payments to baby sitters who work on an occasional basis in your home are unlikely to constitute an employer employee relationship and do not bring the same obligations as employing a child minder on a regular basis.

If you have any queries on the above article, please do not hesitate to contact us.

Ryan & Hickey provide tax and employment advice to clients throughout the South East, including counties Wexford, Kilkenny, Waterford, Carlow & Tipperary.