Home Day Care Tax Deductions
The IRS has several documents and publications explaining allowable tax deductions that individuals and companies can claim. Some deductions are itemized deductions that need to be reported on Schedule A of a tax return form. These are generally expenses you incur during the year, such as medical costs and, for a home day care, business-related expenses.
Other People Are Reading
-
Requirements
-
If you have a home day care, the IRS allows you to claim some tax deductions related to the expenses you have regarding this home. To qualify for a home day care tax deduction, you must have a business that provides day care for children, senior citizens 65 years of age or older or any person who is disabled and incapable of caring for himself. You also must have applied for a day care license, certification, registration or approval, and your state must have either granted it to you or exempted you from it.
Misconceptions
-
Most of the tax breaks related to running a home day care are tax deductions, not tax credits. While a tax credit is an amount by which you can reduce the taxes you pay to the federal government, a tax deduction reduces the calculated amount of actual earnings for which you pay taxes. Receiving a tax deduction rather than a tax credit is more advantageous for home day care owners because it can put them in a lower tax bracket.
-
Type 1: Home Expenses
-
Home expenses are expenses you incur that relate to the day care services you provide, such as electricity, gas and water. The IRS allows you to claim home expense deductions. These deductions only apply to the percentage of your home that you use to provide day care and the percentage of hours in which you do so. Once you know both percentages, multiply them by each other and multiply the result by your total home expenses. The final result is how much you can itemize as home expense deductions.
Type 2: Food Expenses
-
The expenses you have regarding the provision of food to the people in your day care home are fully deductible and must be claimed on Schedule C of your tax return Form 1040. According to IRS Publication 587, you can claim $1.17 for breakfast per person, $2.18 for lunch per person, $2.18 for dinner per person and $0.65 per snack (for three snacks per day) in cases in which you take care of children. Additionally, you can claim 50 percent of the costs of meals for your employees.
Type 3: Mileage
-
The expenses you have for mileage relating to the services you provide in running a home day care are also fully deductible. This includes the expenses you incur related to day care activities, such as taking children to school. Calculate the total amount of miles you drive, and then calculate how many miles you drive for day care services. Take the percentage of miles for day care services out of the total miles. Apply this percentage to your total expenses in mileage. The result you get is how much you can deduct from your taxes for mileage.
-
References
- Photo Credit Thinkstock/Comstock/Getty Images
