What makes a home day care tax return special? The biggest difference between a daycare and every other business in the world is the time-space percentage for home business spaces. Most people, in order to deduct a home office, have to meet two criteria: regular use and exclusive use. Daycares instead get to count all space used, but they have to multiply it by the percentage of time they use the space. For areas that are regular and exclusive, the expenses for this part are 100% deductible. Since it is often confusing, we are here to make it simple!
Another difference for daycares is what they get to include in the deductible items. Unique to daycare are expenses for:
- Yard maintenance, if the yard is used by the daycare kids
- Cable/satellite TV costs, if the kids watch TV
- Pool maintenance costs, if the kids use the pool
- Household furnishings and appliances, if used by the daycare kids
Daycare also gets special allowances for meals fed to the kids. It is possible to tally the groceries and then allocate to daycare the items used for daycare, but this becomes a nightmare to prove in an audit. Instead, daycare providers can deduct the standard meal rates. For 2012, these numbers in the Continental United States are:
- Breakfast: $1.32 each meal, per child fed
- Lunch and Dinner: $2.48 each meal, per child fed
- Snacks: $0.74 for up to three snacks per child fed per day
To take these standards, the only recordkeeping requirement is a log of children fed each meal. Using the Minute Menu online software program, this is not only easy, it gives you a handy report at the end of the year! Use this program to record meals even if they are not reimbursable under the Child and Adult Care Food Program.
Tip: Supply items are often purchased from the same places as groceries. Because supply items are NOT included in the above figures, be sure to track these items from your grocery receipts for deductions. Some of the items will be subject to the time-space percentage, such as cleaning supplies and toilet paper, but other items may be specific to the daycare, such as containers, administrative supplies, paper places, plastic utensils, medications, toys, and diapering supplies.
We will need the answers to these questions:
- What is the total square footage of the living area of your house?
- What is the square footage of the garage? Is it used for daycare?
- What is the total square footage of any areas used ONLY for the daycare?
- What is the total square footage used both by daycare and by the family? (Don’t forget to include areas that might not be included for licensing, such as an upstairs laundry area, office, or storage area!)
- What is the number of hours you operated as a daycare for the year, with children present?
- What is the number of hours you spent doing daycare support, such as administrative work, cleaning, talking to parents, prepping, planning, cooking, and setting up? (Time away from the home, such as shopping time, does not count.)
- spreadsheet Download our business use of home form (10 KB) to tally the deductible home office expenses and pdf Daycare Providers Full Packet (491 KB) for more information. We will take care of the rest!