You're hitting on an important theoretical point with regards to income taxes, which is that do it yourself work is effectively subsidized because the fair market value isn't imputed for taxation purposes.
Imputing taxes is a can of worms, but it doesn't help your position. If such taxes existed, you'd be taxed on the fair market value of the child care duties performed by your wife.
Interesting. I think I understand a bit better now after thinking through the following hypothetical:
I decide to swap kids with a neighbor during the day. My wife watches their kids, they watch our kids. We pay each other 40k a year to do so. I would then be able to deduct the 40k as a child care expense, but I would also have 40k additional income. The net result on taxable income would be zero.
Comments
You're hitting on an important theoretical point with regards to income taxes, which is that do it yourself work is effectively subsidized because the fair market value isn't imputed for taxation purposes.
Imputing taxes is a can of worms, but it doesn't help your position. If such taxes existed, you'd be taxed on the fair market value of the child care duties performed by your wife.
Interesting. I think I understand a bit better now after thinking through the following hypothetical:
I decide to swap kids with a neighbor during the day. My wife watches their kids, they watch our kids. We pay each other 40k a year to do so. I would then be able to deduct the 40k as a child care expense, but I would also have 40k additional income. The net result on taxable income would be zero.
In a lot of ways, that makes perfect sense.