Home Daycare Tax Deductions

Operating a home daycare facility offers numerous tax deductions. All the fees you collect for providing daycare services are reported as taxable income. Nearly every expense associated with the daycare business are home daycare tax deductions.

Record keeping in the form of dated receipts reduces objections from the IRS.

Tax laws change frequently so check back for the latest IRS guidelines each year for these home daycare tax deductions.

Mileage Deduction Definition

A mileage deduction applies to any driving you do that relates to the daycare. Field trips or other instances of transporting the children under your care count toward the mileage deduction. Driving to complete errands for the daycare, even if the children aren’t present, may also save on your income taxes.

Driving to the store for supplies, the bank to make a daycare tuition deposit or to training for your licensing are examples of mileage deductions available to your home daycare tax deductions.

The IRS standard business mileage deduction for tax year 2014 is 56 cents per mile.

Food Tax Deduction

The first step is to determine the business percentage of your use for food.

The majority of in-home daycare providers serve meals and snacks to the children throughout the day. The groceries purchased to feed the children represent another tax deduction possibility. Receipts that detail the food purchases provide the necessary documentation to take the deduction.

Food for the daycare children should be purchased on a separate order from the family’s food to make the home daycare tax deductions easier to calculate. A separate storage area for the daycare food ensures it stays separate.

To learn about tax rules for home daycare meal rates, click this link.

Home Daycare Supplies Deduction

Supplies used for the daycare clients offer another option for a deduction. The supply deduction is similar to the one for food.

The receipts for these purchases document the amount spent for items such as art supplies, baby wipes, cleaner, soap, paper towels and plastic wrap. When these items are consumed by both the daycare clients and your family, a portion of the expense may be deducted.

Keeping a list of every item used throughout the day reveals the various supplies consumed by the children.

Home Daycare Utilities Deduction

The monthly utility bills for the home present another opportunity for tax deductions. While the entire bill won’t be eligible for a deduction, a portion of the bill may work. The amount that is deductible depends on the amount of space used for the daycare and the number of hours the daycare children are present in the home.

Water, heat, trash and phone services fall under the utility category.

Home Deductions

The actual house itself offers a possibility for home daycare tax deductions. Upgrades to the area used for the in-home daycare may work as a business deduction. Improvements may include new flooring, paint or electrical work in the area. Detailed receipts for these upgrades provide proof of the work.

More Home Daycare Tax Deductions

  • Advertising (phone book, newspaper, website, etc
  • Bedding (blankets, sheets, nap mats, pillows, etc)
  • Big Ticket items (will usually last longer than a year and will include items such as baby beds, toddler beds, televisions, playground equipment, computer, etc)
  • Continuing Education (conferences, CPR classes, etc)
  • Insurance (liability)
  • License/Fees
  • Medical (prescriptions, physicals, band aids, etc)
  • Office Supplies (paper, pens, toner, computer supplies)
  • Paper Supplies (plates, cups, silverware, toilet paper, paper towels, etc)
  • Safety/Security
  • Temporary Help
  • Toys
  • Real Estate Taxes
  • Home Mortgage Interest
  • Insurance (liability)

Remember, keep all receipts for these expenses. It is not necessary to bring in the receipts but you must present them if the IRS requests them. The more organized they are the better the chance of the expense not getting disallowed in an audit.