A Comprehensive Daycare Provider Tax Deduction Checklist
Tax season is a period of stress when you worry not only about filing taxes but about ways you could reduce the tax burden. Although no one wants to talk about it, there are several home daycare tax deductions that small businesses like daycare providers should be aware of.
Isn’t it another task on the list? No, it isn’t. Tax deductions are a wonderful thing! They lower your tax burden, and isn't that what we all want? As a parent, you might wonder, does my child care provider have to pay taxes? Many of the same tax deductions apply to daycare providers as they do to other businesses, such as advertisement, insurance, and general office expenses. There are, however, a number of tax write-offs specifically available to daycare providers. All one has to do is keep detailed records of daycare service expenses to get the most out of home daycare tax deductions.
Common Home Day Care Tax Deductions For Daycare Businesses
1. Expenses Of Employees and Contractors
The first on our list of home daycare tax deductions are the costs of managing daycare workers. Workers' earnings, vacation pay, and insurance plans are all deductible employee expenses. If a business pays its employees' mileage or gas expenses on a car or truck, the reimbursement might be deducted. You can deduct all of your extra money from bonuses, loans, and salary advances, too.
2. Bank Fee and Interests
You most likely have a small company bank account to handle not just your spending but also client payments. Monthly bank fees linked with these types of accounts can quickly pile up. Bank fees and interests are one of the in-home daycare tax write-offs that you can deduct from your taxes.
Did you get a loan to start your business? Perhaps you required new furnishings or had to make some repairs? The interest on such loans is thus tax-deductible as well.
3. Advertising Charges
You may be able to deduct some or all of your advertising costs, regardless of the medium you use for advertisement, from web ads to direct mail. Knowing that advertising is tax-deductible may encourage you to spend more money on it, allowing you to expand your business.
4. Continuing Education Fee
It is critical in this profession to be up to date with the current child care practices. If you attend a workshop or course or pay any of your team members for doing so, you can include those costs in-home daycare tax deductions, as well as transportation to and from the institution and any required books. The education must be directly applicable to the work. You cannot employ an untrained individual to work at your daycare and then pay for their training so that they fulfill the minimum educational standards.
5. Membership Dues
Are you a member of any professional organization or association? If this is the case, then your membership fees and dues, as well as any professional expenses for certification, are another in-home daycare tax write-offs.
6. Supplies Charges
These products are materials directly relevant to the operation of the childcare and not personal use items of the owner. For example, diapers, bottles, wipes, formula, and cleaning supplies, as well as any other items required for daily operations, can be included. This also covers office supplies like stamps, paper, and ink.
7. Equipment Costs and Furniture
Yes, it’s true that in-home daycare tax write-offs also apply to all the equipment and furniture costs as well. Here's a difficult one: equipment or furniture bought particularly for the daycare may be tax-deductible, but depending on how big the purchase is, it may be considered a "capital expense."
The term "capital costs" refers to the money invested in an asset that a company invests in to create revenue, but that will depreciate over time. Depreciation will be taken into account in future tax returns. Regular expenses, on the other hand, apply to whole or partial amounts.
Capitalizing an expense allows a business to appropriately measure its profits. For example, if you spent $15,000 on playground equipment for your daycare, it may have a significant impact on your profits for the year, based on your revenue and other expenses. To avoid this, the $15,000 cost will be spread out over several years.
8. Meal Expenses
Meal expenses are another home daycare tax deduction that you can use to reduce your tax burden. Daycare facilities are explicitly permitted to deduct meals for their little clientele. A childcare operator may also deduct employee lunches, either partially or completely, under specific conditions.
9. Insurance Charges
Running a daycare undoubtedly necessitates some industry-specific insurance costs. Because the childcare business is booming, many insurance firms offer 'daycare insurance.'
10. Car Travel
The number of eligible business miles driven qualifies for a deduction. Deductible travel costs include journeys to and from classes to develop daycare expertise, field trips with participants, and errands related to the daycare business, such as trips to the bank.
11. Taxes For In-Home Daycare
According to the IRS, in-home daycare tax write-offs are available. Real estate taxes, rent, mortgage interest, utilities, insurance, and repairs are all deductible costs. The portion of the tax deduction depends on how much of the home is used as a daycare home business. If you have a fixed site outside of your house where you offer daycare services, you are not eligible for this deduction.
Conclusion
There are so many tax deductions permitted by IRS on daycare businesses. To claim, however, you would need to prove that you are eligible to do so. You can easily do that by carefully keeping a completer record of all your business expenses. Remember, you may also be asked why were the money spent. Filing taxes can be stressful, no doubt about it. If you are overwhelmed with your business, you can reach out to a tax professional so that they can aid you in filing your taxes while you focus on the growth of your business.