While daycare centers typically enjoy all the possible deductions available to any ongoing business, you may be surprised to learn that there are particularly focused tax deductions for daycare providers that some other businesses may not enjoy.
Now that this year’s tax deadline has come and gone, it is worthwhile to start looking ahead to the next year to see how you can better manage your taxes. Perhaps, you may be able to claim some deductions that you might not have used when you filed this past July.
Accordingly, in this article, we are going go through the tax deductions for daycare providers that you need to know about if you do provide daycare services, particularly if you do so out of your own home.
If, after reading this article, you have additional questions about tax deductions for daycare providers, then we welcome you to give us a call at Doane & Doane, PA. Our firm focuses on probate, estate, and tax matters. We care deeply about our clients and want to make sure that they have the best, most up-to-date, information available.
At Doane & Doane, PA, we strive to give our clients the personalized legal counsel they need to appropriately take care of their taxes and other estate matters. Contact us at Doane & Doane, PA for estate planning advice and services. You can contact us today at 561-656-0200 or fill out our online contact form.
Some of The Basics
Daycare providers typically are self-employed individuals who provide daycare services in their own homes. Thus, like any other self-employed individual, daycare providers are permitted to claim tax deductions for their legitimate business expenses.
If you are a self-employed daycare provider, then consider these expenses as tax deductions for daycare providers.
1. Business Use of a Car
If you use your personal vehicle to take the kids you watch to the park or other field trips, then those miles are tax-deductible. Also, when you go to the store to purchase supplies for the kids, that is travel related solely to your business. Thus, you can claim those miles driven as an expense at the rate of approximately 58 cents per business mile. (Be sure to check the rate, as it can change from year to year).
If you provide meals to the children you care for, then the cost of those meals can also be considered a business expense. What is good about this business expense is that you do not have to document every food purchase. Rather, the IRS provides for a “simplified method,” which allows you to claim a certain deduction amount per meal.
3. Business Use of Your Home
When you use your own home as the primary location of your daycare business, you can take a business tax deduction for a portion of your home that you use for business purposes. Unlike other self-employed taxpayers, daycare providers do not need to claim to the IRS that the portion of their home used for daycare is exclusively used for that purpose (the so-called “exclusive use” requirement), but daycare providers are not exempt from the “exclusive use” requirement unless they:
1. Are licensed by the state as a daycare provider;
2. Have a pending license application; or
3. Are exempt from the licensing requirement.
4. Daycare Insurance
There has been a marked increase in daycare centers in the last few years. Insurance companies have taken notice, and they offer “daycare insurance” to daycare providers. If you have obtained a daycare insurance policy, then you can claim a deduction for the insurance premiums you pay.
5. Employee Wages
If you are a daycare provider who employs a few people to assist you with your daycare services, then the wages you pay to your employees can be deducted from your taxes.
6. Bank Fees and Interest
You likely have a small business bank account for your daycare operation. If so, any bank fees you need to pay in connection with that account are deductible. In addition, if you took out a loan when you started your business, or to purchase more furniture for the kids, the interest you pay on that loan is also tax-deductible.
7. Other Possible Deductions
There are indeed a number of other possible tax deductions for daycare providers that you may use, including:
2. Daycare organization membership fees
3. Cost of games and toys
4. Supplies like diapers and cleaning supplies
5. Phone service
6. Internet service (prorated to offset for personal use)
7. Seminars and education related to daycare center operations.
Look to Doane & Doane for Help with Tax Deductions for Daycare Providers
Founded in 2003 by husband and wife legal team, Randell C. Doane and Rebecca G. Doane, Doane & Doane provides legal and financial services to families, individuals, and businesses throughout Southeast Florida.
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