Thanks for the response--the other side of the question is... can my parents count their money from us as income for the purpose of their own taxes?

Count your blessings, OP.

The only people you can pay without a tax obligation are your children and your parents. So, no income tax due! I think this probably means no tax deduction for childcare costs too, but would have to check with an accountant.

I am so lost here. My parents acted as our child care last year full time (40 hours a week) and we paid them. The year before, they did some babysitting but were also working part-time. This year, they are retired and this is their only income, other than payments from pension.

What do we need to do as far as taxes? Googling has shown me nanny tax information, but there are exceptions if the nanny is your parent. I just want to make sure we’re doing what’s legal—and my parents want to file taxes with our payments as their income.