14 Dec Is my babysitting income taxable?
Q. I’ve been babysitting for my neighbor for money, paid cash, and I wasn’t planning to include it as income. But now I’m feeling guilty. What should I do, and do I have to include the money as income?
A. Lots of babysitters never report their income, but that doesn’t make it right.
There is no minimum amount of revenue that is excludable unless the source of income is specifically exempt, said Steven Gallo, a certified public accountant with U.S. Financial Services in Fairfield.
He said babysitting is not one of those exempt revenue sources.
“You are entitled to deduct expenses attributed to the rendering of your services such as snacks you may provide, supplies, use of your car and if you have a designated room of your house that is exclusively used for babysitting services, you may be entitled to deduct a portion of your household costs,” Gallo said.
You must also be aware that you are not only subject to income tax on this revenue, but additionally, you would be required to pay 15.6 percent in self- employment tax (Social Security tax), Gallo said.
There are strategies to reduce the your taxable income if you’re concerned about the taxes you’d owe.
“You may be able to contribute to a qualified retirement account — IRA or SEP IRA — which could reduce the amount of income tax payable currently and defer it to your retirement years, when you may be in a lower tax bracket,” Gallo said.
Email your questions to .
This post was first published in December 2016.NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.