How to Use Groceries as a Tax Deduction for your Daycare

Using food expenses is a great way to get more money back at tax time. The IRS has provided the means for home daycare businesses to get additional tax breaks, and the information is easy to use.

Difficulty: Moderate

Instructions

Things You'll Need:

• Filing System or Box Marked Receipts
• Envelopes

1. 
    

   Mark envelopes by the month, and carry this month's envelope in your purse where you will remember to use it. If you look at Wal-Mart or Staples, you can find a plastic envelope with an elastic closure that can take the wear and tear of being carried in your purse, and you could transfer the receipts to a paper envelope at the end of the month.

2. 
    

   Shop in bulk to save money, and pay for daycare groceries separate from family groceries. This makes it easy to PROVE that you are not sneaking family food into your daycare write-offs at tax time. Mark the back of each receipt as you make your purchases, so that you don't have to guess at the end of the year.

3. 
    

   When you do your taxes, you can claim the food as a business expense. There are two different ways to do it; you can claim the exact amount of money that you spent on food, which you will be able to prove with your daycare receipts. The other way is to use the standard meal allowance that the IRS uses. This rate is based on CACFP reimbursement rates.
   The CACFP rates for the 2008 tax year are for tier I (lower 48 states) Breakfast $1.17 Lunch or Supper $2.18 Snack .65.
   For tier II Breakfast .43 Lunch or Supper $1.31 Snack .18
   If you don't know which tier you are on, call your licensor and ASK! I don't even know anyone that is on tier II, and it will be worth the call to get the extra credit!

4. 
    

   Check both methods to see which method will net you a larger return. I always used the IRS standard meal allowance, and it made a VERY LARGE difference in the amount of money I got back.

Tips & Warnings

• The IRS allows you to claim one breakfast, one lunch, one supper, and three snacks per day per child, as long as they were served to the child.
• Using the standard meal allowance will be much easier if you use daycare software, as the software will track your meal counts.

Resources

• USDA
• IRS

[gluestickgirl]

on 12/22/2009 Great article! Thanks 5** and a rec.

[gentletouch]

on 10/9/2009 TAX DEDUCTION FOR DAYCARE IS INFORMATIVE
IN SO MANY WAYS. 5* BLESSINGS, gentletouch

[elyria]

on 5/9/2009 Very useful and helpful!

[elyria]

on 5/9/2009 Very useful info!

[joyce300]

on 3/25/2009 5* Technology now permits us to have remote employees, who supplement their income with daycare. I will pass this on. P.S. How do I trigger a 5* rating? I wanted to give you 5*s, but it's not altogether clear how that works.