What the German Tax Office Allows for Grandparent Childcare Costs

When holiday childcare facilities shut or reduce their hours, many families in Germany turn to grandparents for help. That help can also cut the parents' tax bill – even if the grandparents do not charge for their time, according to Jana Bauer, managing director of the Federal Association of Wage Tax Assistance Associations (BVL).

Under German tax law, childcare costs for children up to 14 years old can be deducted as special expenses (Sonderausgaben) at 80% of the costs, capped at €4,800 per child per year. To claim the deduction, parents need a written contract, a fee notice or an invoice, and payment must not be made in cash.

Grandparents often provide care for free, but they frequently have travel costs – driving to collect the child from a holiday camp, sports club or the family home and then returning. If the parents reimburse those travel expenses on the basis of a written agreement, keep a log of the journeys and pay electronically, the reimbursement counts as a deductible childcare expense.

The tax office accepts actual public transport costs (tickets) or, when the grandparent uses a car, a flat rate of €0.30 per kilometre. For example, if a grandmother drives 160 times a year to pick up her seven‑year‑old grandchild from school or holiday care and take the child home (a 15 km round trip each time), she racks up a reimbursable travel cost of €1,440. Eighty per cent of that – €1,152 – lands as a special‑expense deduction on the parents’ tax return.

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Why This Tax Break Is More Useful Than Many Parents Realise

The deduction works only when the grandparents do not live in the same household as the children. The law sees reimbursed travel costs for the grandparent as a legitimate childcare expense because the journey enables the supervision. Trips made by the parents to drop the child off at the grandparents’ house, by contrast, are not deductible.

A win‑win design with little downside

The BVL’s Jana Bauer calls the arrangement a “win‑win”: parents reduce their taxable income, grandparents get their out‑of‑pocket travel costs back without any taxable benefit (the reimbursement is not income for them if it matches actual expenses or the official flat rate), and the children enjoy time with their grandparents. A written agreement is the linchpin – it turns an informal family favour into a transaction the tax office can accept.

Where it fits in the broader childcare tax framework

This travel‑cost deduction sits alongside the main childcare‑cost deduction of up to €4,800 per child per year. Parents can combine the two, provided they stay within the overall cap. The key insight is that even “free” grandparent care can generate a tax saving if the travel side is properly documented. It also shows how German tax law treats formalised reimbursement differently from pocket‑money payments – a distinction many families miss.

Steps for Parents to Claim the Deduction Correctly

  • Sign a written agreement. Even if the grandparents waive payment for their time, put the travel‑cost arrangement on paper; date it and have both parties sign.
  • Log every trip. Keep a table showing date, purpose (e.g. “holiday care pick‑up”), start and end locations, and kilometres driven. For public transport, save the tickets.
  • Pay by bank transfer. Reimburse the grandparents via bank transfer, not cash. The electronic record is essential.
  • Use the correct per‑km rate. For car journeys, claim €0.30 per kilometre for the full round trip (outward and return). For bus or rail, claim the ticket price.
  • File the costs as Sonderausgaben. Enter the total reimbursed travel costs under “Kinderbetreuungskosten” on your annual tax return. Attach the agreement and the log as supporting documents.
  • Check household status. Confirm the grandparents live at a different address. If they share the household, the deduction is lost.