My daughter was born in January of 2008. We're debating whether to send her to an in-home nanny who does not claim the income or a daycare. We like the nanny, but if there's a great tax benefit, we'll take the daycare route beginning in August. Please explain how this "credit" works and if it would be worth it since we also worry about illnesses and adult:child ratios in the daycares. The daycare charges $180/week and the nanny charges $30/day, so my days off I won't be charged.

The Child Care tax credit is keyed to your income; the more you make, the lower the credit.

Further, the credit is capped at about $600.

So, tax-wise, the nanny is your best option.