Your daughter will remain a dependent on your return as long as she is a full time student in the tax year you are filing and under 24 years old. You receive your daughters exemption on your tax return. Your daughter will file a tax return checking the box on Form 1040EZ "someone can claim you as a dependent ". The instructions will allow your daughter a standard deduction but no exemption deduction for your daughter on her tax return. Because your daughter has an intact standard deduction the employee business expense for driving as a nanny will most likely not exceed the standard deduction. Your daughter may want to ask her employer for a tax free reimbursement for her car expenses. Standard mileage can be reimbursement up to 53.5 in 2017 tax free to your daughter and with no employer taxes to her employer. You also may want to check with your insurance agent about your daughters extra driving and passengers to make sure no extra coverage is needed.