Important Note: Time/Space Percentage
If you are new to home daycare please make sure that familiarize yourself with rules for Time/Space Percentage calculations (T/S%). This the most important calculation for home daycare businesses.
Child Related Supplies
These are all the supplies that are directly used by the children and daycare.
Art/Craft supplies
Toys
Games
Books
Trays/baskets/containers for toys
Diapers
Wipes
Baby/Toddler gear
Pack n’ plays, bouncers, jumpers, cribs, changing tables…
Cots and/or nap mats
Cups/plates/silverware
Sheets & blankets
Decor
Curriculum
Music
Playground equipment
Make sure you are making a note on receipts if some of these items are used both by your own child and the daycare. If they are used by your child outside of daycare hours then you can only deduct the T/S% amount of the purchase price.
Furniture & Appliances
Furniture and appliance purchases can be written off as home daycare tax deductions. Some items you can write off the whole cost .
Microwave
Washer & dryer
Refrigerator
Stove
Dishwasher
Tables
Shelving
Desks
Tables
Chairs
Couch
TV
DVD player
Etc…
What else would you add? Did you know that you can also claim the cost of service and repair contracts that come with the furniture?
Home Expenses
These are the expenses that can result from owning (or renting) and maintaining your physical residence.
Property Tax
Mortgage interest
Real estate taxes
House depreciation
Home repairs
Home improvement
Home insurance
Rent
Utilities
Gas, electric, garbage, phone (only if you have an exclusive daycare line), water, sewer, cable, internet
Home Improvements and Repairs
Doing some upgrades or need to make some improvements because of the daycare? You can write off a portion of these expenses.
Fencing
Patios
Flooring
Remodeling areas used for daycare
Furnace
Insulation
Household Supplies
These are supplies that are usually used to maintain your home or used by your household. Items that will be used in your daycare AND for personal household use. You can claim a portion of the cost of these items as an expense on your taxes by using your T/S%.
Toilet paper
Paper towels
Napkins
Paper plates
Paper cups
Cleaning supplies (from sprays & cleaners to vacuums & carpet cleaners)
Dish soap
Hand soap
Laundry detergent
Dryer sheets
Ziploc bags
Aluminum foil
Saran wrap
Garbage bags
Light bulbs
Air fresheners
Welcome mats
Washcloths
Clocks
Snow Shovels
etc… Home Expenses
These are the expenses that can result from owning (or renting) and maintaining your physical residence.
Property Tax
Mortgage interest
Real estate taxes
House depreciation
Home repairs
Home improvement
Home insurance
Rent
Utilities
Gas, electric, garbage, phone (only if you have an exclusive daycare line), water, sewer, cable, internet
Home Improvements and Repairs
Doing some upgrades or need to make some improvements because of the daycare? You can write off a portion of these expenses.
Fencing
Patios
Flooring
Remodeling areas used for daycare
Furnace
Insulation
Household Supplies
These are supplies that are usually used to maintain your home or used by your household. Items that will be used in your daycare AND for personal household use. You can claim a portion of the cost of these items as an expense on your taxes by using your T/S%.
Toilet paper
Paper towels
Napkins
Paper plates
Paper cups
Cleaning supplies (from sprays & cleaners to vacuums & carpet cleaners)
Dish soap
Hand soap
Laundry detergent
Dryer sheets
Ziploc bags
Aluminum foil
Saran wrap
Garbage bags
Light bulbs
Air fresheners
Welcome mats
Washcloths
Clocks
Snow Shovels
etc…
Office Expenses
Here are some common office-related products that you buy for your home daycare that can be written off.
Printers
Paper
Envelopes
File Folders
Receipt books
Pens
Other Expenses
Activities
Field trips and other activities done with daycare kids
Advertising
Car Expenses
You can use a standard mileage rate by logging the hours you drove with daycare kids and/or to do daycare related things. You can also keep all your receipts for car care and use the actual expense method. Parking fees also count on car expenses. If you have to pay to park while doing a daycare related activity, like a field trip, you can write off this fee.
Bank Fees
Dues and Professionals Fees
Food
This is a MAJOR deduction! You do not have to save receipts as there is a standard meal rate available. You will need to track attendance and meals served in your record-keeping though.
Gifts for daycare kids (up to $25 per/kid per year)
Lawyers
Fees paid to a lawyer for services rendered due to the daycare can also be deducted
Taxes
Fees paid to a tax preparation company, CPA, or for tax software can be written off as a business expense.
Yard service
You cannot deduct time you spend mowing/weeding but you can deduct a portion of the fee for a yard service company.
Time Spent Working Without Daycare Kids
While this isn’t a “deduction” so to speak, keeping track of these hours is SO IMPORTANT for reducing your tax liability! Sadly, it’s also something that is frequently overlooked by new providers. By keeping track of all the extra time you do daycare related things, without kids present, can add a significant number of hours to your working hours in a year. All those extra hours can drastically increase your T/S% and save you from paying more in taxes.
Here are some activities that count towards your time:
Planning activities
Planning meals
Preparing meals
Preparing activities
Unloading groceries for car
Loading & unloading dishwasher
Laundry (daycare sheets, towels, washcloths, blankets, toys…)
Cleaning toys
Cleaning carpets
Cleaning toy shelves
Cleaning the house (areas used by daycare)
Cleaning windows
Cleaning up after kids leave
Setting up playroom/activities in the morning
Rotating or reorganizing toys
Interviews & tours
Phone calls/emails with parents or potential parents
Advertising (posting online ads, updating website)
Networking
Reading books/online articles about home daycare
Online research
Online training
Creating a website
Preparing taxes
Record keeping (meal logs, Attendance records, income ledger, client files)
Creating/updating parent handbooks or contracts
Creating forms, notices, & letters to parents (vacation, termination, contract changes, field trip…)
Painting, repairing, remodeling daycare areas
Maintaining house entryways (ie Shoveling walkways & driveway)
Cleaning out & organizing supply closets or areas
Vacuuming car (if used for daycare)
Baby/child proofing daycare areas
Remember these things need to be daycare related and happen in your daycare home. If you are shopping for groceries or taking a training class at a local facility these do not count as time working without kids because they happen outside of the daycare property. Also, you can’t count hours spent on doing things you would still be doing if you didn’t have a daycare. Activities like general house cleaning, yard work, cleaning out a garage, cleaning the gutters, etc cannot be claimed as time spent because the IRS assumes you would do these things regardless of the daycare. You can only claim things that create additional work because of the daycare.
Hope this is helpful! I am not a tax advisor and I am only sharing things that can be counted as deductions for your daycare business! For info on filing and other tax related questions , you should consult with a tax advisor!!
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