Today, it is increasingly common for both parents to work full-time and to require a childminder to look after their children. In the following, we will explain some income tax fundamentals relating to working as a childminder.
Compensation as a Childminder
In childminding, there is the option of either agreeing on private compensation with the child's parents or being paid by public bodies (municipalities). The amount of compensation paid by public bodies is determined by these bodies themselves pursuant to § 23 SGB VIII. In addition, the child's parents are also required to contribute under this compensation scheme. As a general rule, parents are required to contribute to the costs of their own childminding services pursuant to § 90 Abs. 1 Nr. 3 SGB VIII. This cost-sharing is structured on a flat-rate, tiered basis and depends on the parents' income, the number of children eligible for child benefit, and the weekly hours of care provided by the childminder.
Type of Income from Childminding
In principle, childminding may generate either income from employment (§ 19 EStG) or income from self-employment (§ 18 Abs. 1 Nr. 1 EStG). In practice, income from self-employment is more frequently encountered in childminding. Nevertheless, a childminder may also generate income from employment, since the parents or public bodies act as the employer. Furthermore, the childminder is bound by instructions from the parents or public bodies regarding the location, time, and nature of the care provided. In this case, the childminder would be regarded as an employee and could accordingly deduct the work-related expenses incurred or claim the standard deduction for work-related expenses. Alternatively, income from self-employment may also arise, since the childminder generally carries out the activity on a freelance basis. No prior training or completed examination is therefore required to perform this activity. Income from self-employment can thus usually be determined by means of a cash-basis accounting (Einnahmenüberschuss-Rechnung).
Actual Operating Expenses or Flat-Rate Operating Expense Deduction?
Where income from self-employment is generated, it should be noted that either the actual expenses incurred or a flat-rate operating expense deduction may be claimed. However, the flat-rate operating expense deduction is only available if the care of the children takes place in the childminder's own household. Actual deductible operating expenses include all costs incurred in connection with the care of the children (activity materials, hygiene articles, meals, travel expenses, and insurance specifically for childcare). In addition, rental costs for rooms used to care for the children may also be claimed. The flat-rate operating expense deduction, on the other hand, amounts to 300 euros per child, provided that the childminder reaches a weekly care time of 40 hours. Otherwise, the flat-rate operating expense deduction may be claimed on a pro rata basis (300 € * agreed care time / 40 hours).
Frequently asked questions
Frequently asked questions
What type of income does a childminder generate for tax purposes?
A childminder can generate either income from employment (§ 19 EStG) or income from self-employment (§ 18 Abs. 1 Nr. 1 EStG). In practice, self-employment income predominates, as the activity is usually carried out on a freelance basis and without any prescribed training. Employment income only applies if the childminder is bound by instructions regarding the location, time and manner of care and the parents or a public body act as the employer.
How is remuneration determined in childminding?
Remuneration can either be agreed privately with the parents or paid by public bodies (the municipality). With public funding, the public body sets the amount under § 23 SGB VIII. Parents contribute to the costs on a flat-rate, staggered basis pursuant to § 90 Abs. 1 Nr. 3 SGB VIII – depending on income, the number of children eligible for child benefit, and weekly care hours.
Can a childminder choose between actual business expenses and a lump-sum deduction?
Yes, for income from self-employment there is a right to choose between deducting the actual operating costs and applying a lump-sum business expense allowance. However, the lump sum may only be applied if the care takes place in the childminder's own household. If the care is provided on third-party premises, only the actual costs are deductible.
What is the flat-rate business expense allowance for childminders?
The flat-rate business expense allowance is 300 euros per child cared for, per month, based on a weekly care time of 40 hours. If the agreed care time is shorter, the allowance is calculated proportionally using the formula: 300 € × agreed care time / 40 hours. It is always required that the care takes place in the childminder's own household.
Which costs qualify as actual business expenses in childminding services?
Deductible business expenses include all costs directly related to childcare, such as activity materials, hygiene products, meals, travel costs, and special childcare insurance. Rental costs for rooms used for childcare can also be claimed. These items are typically reported within a cash-basis income statement (Einnahmenüberschussrechnung).