Childcare costs: What tax reductions are there?

Childcare is often essential for parents who both work, although the bill can quickly add up. On average in 2021, the hourly rate for childcare at home nationwide is 9.42 euros and that of a childminder is 3.62 euros, a value that is steadily increasing in an industry hit by the health crisis due to the COVID pandemic. Fortunately for households, this often hefty but necessary investment can be offset by a provision in the tax code that allows a portion of childcare costs to be deducted from income tax under certain conditions.

What are the requirements to benefit from a tax credit?

This tax deduction mainly applies to direct parents with one or more dependent children, but in very specific cases it can also apply to grandparents if they are responsible for the children concerned (divorce, maintenance obligations, etc.), provided that one of their parents remains part of their tax household, when they are of legal age. The child living in the household must be dependent on the tax credit claimant and must not be six years old on 1 January of the relevant tax year (i.e. the child must have been born in 2016 for tax year 2022). Finally, the childcare must be provided either by a state-approved and recognized childminder or in a reception facility that is also approved (creche, school kindergarten, kindergarten or leisure facility). In addition, only expenses for childcare are taken into account when calculating the tax credit: meal or travel costs incurred are therefore excluded from this calculation.

How do I get a child care allowance?

To benefit from the tax reduction in question, all you have to do is fill in your tax return correctly from one year to the next. Therefore, in your next declaration from April, you must state the total amount of your childcare costs for the past year. For better guidance, this amount must be declared in the supplement “Costs for childcare under 6 years of age”, which concerns fields 7GA to 7GG of your income tax return. All expenses listed in your declaration must be substantiated if the administration asks you to do so, for example by presenting a Pajemploi tax receipt if you use a childminder. Therefore, invoices or services paid for in cash without a legal document cannot benefit from a tax deduction.

What is the maximum amount of tax deduction?

The amount of the tax credit corresponds to 50% of the costs incurred for childcare, excluding food and travel expenses: salaries of the childminder, but also social security contributions. All family allowances received for the care of the child must also be deducted from these expenses. From the declared amount, you must also deduct the free choice of childcare supplement (CMG) paid by the Caisse d’Allocations Familiales, as well as any childcare allowance paid by the employer to its employees. Irrespective of the actual amount, the childcare costs claimed are deducted from a higher amount to EUR 2,300 and thus to a maximum of EUR 1,150. In the case of joint custody following a divorce, this ceiling is divided in two: it is therefore set at 1,150 euros, for a maximum tax credit of 575 euros.

Are there other possible tax deductions?

It is also possible to receive a tax credit for caring for children over the age of 6 or as part of home care, although it is uncertain how it will be provided. The calculation of this deduction is the same as the home worker tax credit provided the child lives in the same home as the parent who is completing the tax form. The amount of this tax deduction also corresponds to 50% of the childcare expenses, again excluding meal costs. This time, however, the maximum amount declared is a maximum of EUR 12,000 per year (ie a maximum of EUR 6,000 tax deduction), a ceiling increased by EUR 1,500 for each additional dependent child. The corresponding field on the tax return is field 7DB this time. It is even possible to get a tax credit for hiring a nanny in the first year: this time indicated in field 7DQ of the tax return, it is limited to 15,000 euros per year.

(From the editors of the agency hREF)

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