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

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.