Are nannies and babysitters tips tax deductible in 2026?
Yes — nannies and babysitters are on the IRS tipped occupation list (code 508). Tips in this job are deductible for 2026, up to $25,000, if the customer chose the amount and could have declined.
Treasury Tipped Occupation Code 508 · Personal services · official title: Nannies and Babysitters
How tipping works in this job
Occasional babysitting is tipped by rounding up at the door, and the amounts are small but frequent. Full-time nannies see a different pattern: a holiday bonus, and extra for a late night or a weekend away. Hotel and gym childcare staff are tipped directly by parents at pickup.
The regulations say: Attend to children at businesses and private households. Perform a variety of tasks, such as dressing, feeding, bathing, and overseeing play. Examples given: Au pair, child sitter at hotels and gyms.
The thing most likely to disqualify your tips
A nanny’s holiday bonus from the family who employs her is wages from an employer, not a tip — household employers are still employers. The rounding-up at the door after an evening sit is the clearer qualifying case. Where a family pays you on the books, expect the bonus to appear on your W-2 as wages, and treat it accordingly.
Check your own numbers
Pre-filled for nannies and babysitters. Runs entirely in your browser — nothing is uploaded.
Step 1 — your occupation
Checking for Nannies and babysitters (Treasury code 508). This occupation is on the list.
Step 2 — is it actually a tip?
Answer for the money you are asking about. If some of your income is tips and some is service charges, run them separately.
Step 3 — your tips and income
The phase-out runs on modified AGI, which for most people is the same as AGI.
3 questions left to answer.
OBBBA Deductions · obbbadeductions.com
Tips deduction worksheet — tax year 2026
The three tests, as answered
- Does the customer decide the amount? not answered
- Can the customer decline to pay it? not answered
- Is it a mandatory service charge or auto-gratuity? not answered
Answer the 3 remaining questions above for a result.
Watch out for this in your job: A nanny’s holiday bonus from the family who employs her is wages from an employer, not a tip — household employers are still employers. The rounding-up at the door after an evening sit is the clearer qualifying case. Where a family pays you on the books, expect the bonus to appear on your W-2 as wages, and treat it accordingly.
Educational estimate only, not tax advice. It runs entirely in your browser and nothing you type is sent anywhere. The deduction is scheduled to expire after tax year 2028.
How this applies to nannies and babysitters
The most important thing about this occupation is that a family employing a nanny is an employer, with all that implies. That single fact resolves most of the questions people bring to it. A holiday bonus from the family you work for, an extra week’s pay at the end of a year, a raise, a retention payment when they want you to stay another year — all of it is compensation from an employer, and none of it is a tip, however affectionately it is given and however much it feels like a gift.
Occasional babysitting is the cleaner case. Parents come home, hand over the hourly total, and round up — often substantially, and often because they were later than promised. That rounding is a customer-determined voluntary payment on top of an agreed price, which is exactly what the deduction is written for. It is also small, cash, and completely unrecorded, so a sitter working several nights a week has a real annual figure and no evidence of it unless they keep one.
Childcare provided at hotels, gyms, ski resorts and event venues follows a third pattern. There the family is a customer of the facility rather than your employer, and parents tip directly at pickup much as they would any other service worker. That money is straightforwardly qualifying, and where the facility runs a shared box it arrives as a distribution.
Au pairs sit awkwardly here because the arrangement centres on a stipend, room and board rather than a wage, and the stipend is compensation under the programme rather than a gratuity. Extra cash handed over for a weekend away or a late night is a different matter and can qualify. As with every household arrangement, if the family pays you on the books, expect anything they route through payroll to be treated as wages — which is the correct treatment, and simply means it is not the part this deduction reaches.
The three tests, whatever your job
Paid voluntarily
The customer sets the amount and can decline to pay it.
Paid in cash or a cash equivalent
Card payments and mobile payments count.
Received directly or through a tip pool
Both routes qualify.
Questions
- Are nannies and babysitters on the IRS tipped occupation list?
- Yes. Nannies and Babysitters is Treasury Tipped Occupation Code 508, in the personal services category. The regulations describe it as: Attend to children at businesses and private households. Perform a variety of tasks, such as dressing, feeding, bathing, and overseeing play.
- What is the most common reason nannies and babysitters lose the deduction?
- A nanny’s holiday bonus from the family who employs her is wages from an employer, not a tip — household employers are still employers. The rounding-up at the door after an evening sit is the clearer qualifying case. Where a family pays you on the books, expect the bonus to appear on your W-2 as wages, and treat it accordingly.
- How much of my tips can I deduct?
- Up to $25,000 per return, whatever your filing status. The cap applies first, then the amount is reduced by $100 for every $1,000 of modified adjusted gross income above the threshold for your filing status.
- Does a mandatory service charge count as a tip?
- No. A mandatory service charge or automatic gratuity is not a qualifying tip, and the final regulations confirmed this explicitly. It does not qualify even when the customer cannot decline it — a qualifying tip has to be an amount the customer chose to give.
Related occupations in personal services
- 509
Visual artists
You make original visual work — the code has in mind artists working live, like caricaturists and ice sculptors.
- 510
Floral designers
You design and build floral arrangements — shop work, or flowers for events and weddings.
- 501
Personal care and service workers
You provide hands-on daily care and personal assistance to someone who needs help with the ordinary business of living.
Occupation data transcribed from T.D. 10044 — final regulations on occupations that customarily and regularly received tips, Treas. Reg. § 1.224-1(h) table 1, last verified 2026-09-08. Read the regulations.