Daycare tax deduction
If you have some form of day care business in your home, you are eligible for the daycare tax deduction. This deduction is valid even if you do not use the premises exclusively for business. What could be a daycare center by day, can also be home by night; and you will still be eligible.
It is necessary to understand what qualifies as a daycare business. When you provide care for persons or children incapable of watching after themselves due to physical or mental impairments you are in the daycare business. Usually to run one you need to have valid licenses or certifications. If you have had your license revoked or certifications rejected, or for any other reason you are not eligible to run a daycare center you will not be allowed this deduction.
When running a daycare facility there are a few important things you must keep in mind when figuring your allowable deductions. First off you are entitled to deductions related to the location in which you conduct your business, in this case your home.
It is necessary to find out exactly what portions of your home you occupy for business use and how frequent that is. If you use certain portions exclusively for daycare then you are, abiding by the stated limits, eligible to deduct all expenses. If the usage is partly business and a portion personal use then you will need to state what percentage of the premises total use is for business.
This does not mean that you have to log hours physically and maintain records of the same. Let’s say you run a day nursery for children in your basement, for a certain amount of hours a day Monday through Friday. You may use the basement for personal use for the rest of the time, it does not matter; you are eligible to show the time used and claim deductions. However, if you were to use the basement occasionally for babysitting, you would not be allowed to claim it as a deduction.
Along with the basement you might be using an additional room or rooms in your house where children could take a nap, eat, or do activities. Though the room is unlikely to be used all the time, you need to keep it available through the business day. These rooms also qualify as an expense and are eligible to figure in your tax deductions. Also expenses related to the maintenance and repair of these rooms can be figured in your expense list.
If you qualify as a family daycare provider then you can claim deduction on expenses made on providing meals and snacks. If you have employees, you can deduct 100% of their food cost as expense, provided that their salary does not include a food component. If you provide snacks and meals to your wards then to claim deductions you need to maintain records of consumption and show them to be exclusively for the daycare centre. Since your own household is fed from the same kitchen it may be a difficult process to follow. It is advisable therefore to show the standard rate for meals and snacks as an expense and claim them as a deduction.
Standard rates are applicable per person for breakfast, lunch dinner and three snacks per day. This typically includes beverages but not non-food material that may be needed to prepare or serve the food. Such utilities, however, can be shown as a separate expense.
So while daycare can be a taxing business, a little care could make sure that the taxes don’t make you feel so. Plan ahead and you could take care of it all!