Tax Concerns for Postpartum Doula Services | Childcare Tax Credit and 1099

Hiring a doula can come with significant investment, especially when a doula is serving your family for extended amounts of time! We understand the desire to offset the costs of this care, with either the childcare tax credit, or questioning whether or not you can issue your doula a 1099.

We chatted with Elina Linderman of La Rusa Tax about doula services. This blog post is not a substitute for professional tax advice, and all tax matters should be discussed with an IRS tax professional.

Her recent client, let’s call them Mike and Sarah- had just had a baby. The called Elina asking about if they could use the childcare tax credit towards the cost of postpartum overnight doula services. Elina and I got into a discussion about these matters- as a doula and an EA we took a look over some of the tax codes that pertain specifically to childcare and household employees!

A few things to note before we get into the nitty gritty!

1099 and household employee classification

The definition of a household employee is in IRS Pub 926: https://www.irs.gov/pub/irs-pdf/p926.pdf

Typically Doulas are NOT household employees. Though sometimes, they may be with independent doulas who have an agreement and specific work arrangements directly with your family. Most are self employed or employed by an agency. They will receive a 1099 from their agency, or they are responsible for claiming their own income from their clients.

“You have a household employee if you hired someone to do household work and that worker is your employee. The worker is your employee if you can control not only what work is done, but how it is done. If the worker is your employee, it doesn't matter whether the work is full time or part time or that you hired the worker through an agency or from a list provided by an agency or association. It also doesn't matter whether you pay the worker on an hourly, daily, or weekly basis, or by the job.” (IRS.GOV)

“Workers who aren't your employees. If only the worker can control how the work is done, the worker isn't your employee but is self-employed. A self-employed worker usually provides his or her own tools and offers services to the general public in an independent business. A worker who performs child care services for you in his or her home generally isn't your employee. If an agency provides the worker and controls what work is done and how it is done, the worker isn't your employee.” (IRS.GOV)

Childcare Tax Credit

Long story short- you may be able to use this tax credit… if you were working or looking for work while receiving services.

The specifics on the childcare tax credit can be located here: https://www.irs.gov/pub/irs-pdf/p503.pdf

Must Be Working or Looking for Work (Publication 503 (2021))

“To be work related, your expenses must allow you to work or look for work. If you are married, generally both you and your spouse must work or look for work. One spouse is treated as working during any month he or she is a full-time student or isn't physically or mentally able to care for himself or herself.

Your work can be for others or in your own business or partnership. It can be either full-time or part-time and it can be either in or out of your home.

Work also includes actively looking for work. However, if you don't find a job and have no earned income for the year, you can't take this credit. See You Must Have Earned Income, earlier.

An expense isn't considered work related merely be- cause you had it while you were working. The purpose of the expense must be to allow you to work. Whether your expenses allow you to work or look for work depends on the facts.”

This means if you are not actively working or looking for work, and you are on maternity/parental leave- Postpartum Doula care is not eligible for the Childcare Tax Credit. If you are using the time your postpartum doula is caring for you, the home, and the baby- to look for work or to work, it would be eligible.

Please refer to a tax professional, or your own research on the IRS website for future filings as this is not a replacement for tax advice.