As a home child care provider there are many things you need for tax time. You are a business and will need to file taxes every year. This can be a very difficult time for many and being prepared, talking to your accountant and doing some research will help you tremendously. In time this should become a habit and will be part of your regular routine.
This formula is used to determine the business portion of your child care expenses that are used for both business and personal reasons. Use this formula on shared expenses like utilities, property tax, house insurance, household repairs, fences, computers, toys, cleaning supplies and so on.
Time percent-calculate the number of hours your home is used for business.
Space percent-number of square feet of home that is regularly used for business
Quiz Question: Should I include the space of my garage in the total square feet of my home?
Yes, most providers use this space for regular use for their business. Some examples: garbage can, hose, cots, bikes, outdoor toys, helmets, car, etc.
All items that are necessary for child care can be deducted.
Any item is deductible if is it used in the business.
Quiz Question: Can I deduct the cost of having someone plow my driveway?
Yes, it is necessary for your business. It would be Time-Space% and would be considered repairs and maintenance.
A trip can be claimed as a business expense if the primary reason is for child care.
Always keep good records to prove it was a business trip.
Quiz Question: A provider goes to the store to purchase food both personally and for business, can this trip be deducted?
If the main reason is for the business you can claim the trip, which means at least 51% is business-related. If more money is spent on child care food than personal then you may claim it as an expense.
Recordkeeping is a very important part of any business. As a self-employed taxpayer, you have to report your income and expenses to the IRS every year. Having proper records is very helpful.
Quiz Question: If I go to the park and do my paperwork there while I am enjoying the evening, may I count those as hours worked?
No, you must be in your home or on your property to count any hours spent on business activities.
For some more information on taxes, insurance, marketing, policies and contracts go to Tom Copeland's website, here you will find many resources and handouts that will help you along the way. Your Child Care Consultant is also a great resource for questions you may have regarding your business. Connect with your Child Care Consultant here.