Running a home daycare business is like any other business, with a few additional industry-specific expenses you can take advantage of. If you have a Home Daycare business (must be based in your residence), business use of home and meals are expenses you should know about.
Below are expenses that you may be able to take advantage of if you are a home provider:
Business Use of Home
If you use a portion of your home to meet with clients and provide daycare services exclusively, the percentage (based on the total square footage of your home) used for business is considered an expense. The percentage of space that you use in your home is needed to calculate such expenses.
For example: The home is 1000 sq. ft.
Business daycare area is: 250 sq. ft.
Percentage of home used for business: 1/4 or 25 percent
In this example, if your utility bills include: electric, water, waste, etc. are $400 per month, you are eligible for a $100 business expense. This equates to 25% of your utility costs. If you DO NOT use the space exclusively, check with your accountant for the formula to figure out your percentage of expenses.
To be able to receive the business expense, you must have applied for, been granted or are in the process of obtaining the required licensing for your daycare center.
If you qualify as a family daycare provider, you can use the standard meal and snack rates, instead of actual costs, to compute the deductible cost of meals and snacks provided to eligible children.
- A family daycare provider is a person engaged in the business of providing family daycare.
- Family daycare is childcare provided to eligible children in the home of the family daycare provider. The care must be non-medical, not involve a transfer of legal custody, and generally last less than 24 hours each day.
- Eligible children are minor children receiving family daycare in the home of the family daycare provider. Eligible children do not include children who are full-time or part-time residents in the home where the childcare is provided or children whose parents or guardians are residents of the same home. Eligible children do not include children who receive daycare services for personal reasons of the provider. For example, if a provider provides daycare services for a relative as a favor to that relative, that child is not an eligible child.
Standard Meal and Snack Rates can be obtained by your state licensing offices (Health and Human Services office).
There are many other expenses related to your daycare business. Daycare AtoZ recommends that you seek the advise of an professional Business Accountant or CPA to answer all your tax related questions. The statements we have made do not qualify us as tax professionals.
Always talk to your accountant before making decisions.
2009 Reference: Index of Publication 587 - Business Use of Your Home (Including Use by Day-Care Providers), http://www.sbrg.irs.gov/taxmap/tmhome.htm