Save taxes - childcare by grandma and grandpa is tax-deductible

They are happiness on earth and, according to Goethe, the meaning of life - children. However, children are also expensive. To reduce these costs somewhat, there are direct and indirect subsidies from the state. For example, it is possible to deduct the costs of childcare from tax if both parents are working.

What many people don't know is that not only the costs of external childcare are tax-deductible, but also the costs of childcare in your own family. This is generally the case if money is actually paid for this on the basis of a contract and the person providing the care does not live in the household themselves.

The travel costs incurred are also deductible, even if the childcare is otherwise provided free of charge on the basis of a contract. In addition, these reimbursed travel costs are not taxable for the grandparents. The reimbursement of travel costs does not constitute earned taxable income, but merely compensation for expenses.

Cash payments are not deductible

However, none of these payments may be made in cash. They must be transferred to an account. This requirement for proof is mandatory in § 10 para. 1 no. 5 sentence 4 EStG. It is not possible to circumvent this provision by classifying care in one's own household as a household-related service in accordance with Section 35 a EStG, as this is expressly excluded in Section 35 a (5) sentence 1, 2nd half-sentence EStG.

Tax law is complex and contains many pitfalls. In addition, the tax authorities place high demands on the comprehensibility of the contractual basis for childcare by grandparents or other family members. It is therefore advisable to seek support from a tax advisor when using the scope for structuring. They know both the legal basis and the relevant case law and are therefore familiar with the existing pitfalls. With their expertise, they can get the best tax savings for you.