Taxes for the daycare you run at home
Your kitchen, your living room, and your backyard are all part of the business. Your return should show it.
Nothing is due today. Personal returns start at $250.
Your business runs in the same rooms where your family eats dinner. That one fact changes almost every line of your return, from how much of the rent comes off to how the food gets counted. There is a set of rules written specifically for daycare in the home, and they only help you if the person preparing your return knows to reach for them.
What childcare providers can usually deduct
Ordinary and necessary costs of your work. Rules and dollar limits change year to year, so we confirm every one of these against the current year when we prepare your return.
Your time-space percentage
This calculation drives much of your return. You count the hours your home is used for the daycare against the total hours in the year, then apply that to the share of your square footage the children use. That percentage of your rent or mortgage interest, property taxes, utilities, homeowners insurance, repairs, and home depreciation becomes deductible. If a room is used only for daycare and nothing else, that space is not cut down by the hours fraction, so tell us about it.
Daycare has its own exception to the exclusive-use test, but only if you have applied for, been granted, or are exempt from a license, certification, registration, or approval under your state's law. If you applied and were rejected, or your license was revoked, the exception is off the table for that period.
Hours after the children leave
The time side of the calculation is not just the hours children are in the house. Cleaning up, sanitizing toys, prepping meals, setting up the next day's activities, doing attendance and billing, and meeting with parents all count as daycare hours.
Write these hours down the day they happen. A log kept during the year is what supports the time side of the calculation, and a reconstruction built in April is not the same thing.
Meals and snacks you serve
You can deduct the food you serve the children using the standard meal and snack rates the IRS publishes for family daycare providers, instead of saving and sorting every grocery receipt. The rates are set for each year and there is a cap on how many meals and snacks you can count for each child each day, so we apply the figures in effect for the year you are filing.
You still need a record of which children were served, the dates, and the type of meal. Your own children's meals are not deductible. Food Program money for the other children gets reported alongside the food you bought for them, and it is taxable to the extent it exceeds what you spent on their food. Payments and expenses for your own children stay off the return.
Toys, books, and equipment
Blocks, puzzles, art and craft supplies, dress-up bins, ride-on toys, the water table, the sandbox, the climber in the yard, curriculum kits, and story books.
If your own kids play with it too, only the business share comes off, at your time-space percentage. Something bought only for the daycare and kept out of family use comes off in full.
Licensing, training, and screening
State license and renewal fees, registration, fingerprinting and background checks, CPR and pediatric first aid certification, required annual training hours, and the classes and conferences you take to keep the license current.
Training that qualifies you for a different profession, such as a teaching degree, falls under a different rule and usually is not a business deduction.
Childproofing and safety equipment
Gates, outlet covers, cabinet locks, corner guards, smoke and carbon monoxide detectors, fire extinguishers, first aid kits, fencing the yard, and mulch or rubber surfacing under the play set.
A fence or a play structure is treated as an asset rather than a supply, so it is generally written off over time, although an election may let you take more of it up front. Keep the invoice and the date you started using it and we will make that call.
Cleaning and household supplies
Disinfectant wipes, hand soap, paper towels, gloves, trash bags, toilet paper, and the detergent that washes cot sheets, nap mats, and blankets.
Your family uses these too, so they go on at your time-space percentage, not at full cost, unless you keep a separate stock only the daycare touches.
Diapering and feeding supplies
Diapers, wipes, diaper cream, changing table and pad, bibs, sippy cups, plates and utensils, high chairs, tissues, and sunscreen for outside time. Bought for the children in your care, these are ordinary business costs.
Anything your own children also use goes on at the business share, not in full, so it helps to keep the daycare stock separate from the family stock.
Appliances your family shares
The washer and dryer running nap sheets, the second freezer holding daycare food, the refrigerator, the vacuum, the microwave, and the computer or tablet you use for attendance and billing.
Shared items go in at the business share, and larger purchases may have to be written off over several years rather than all in the year you bought them.
Driving for the daycare
Grocery runs for the children's food, supply pickups, field trips, drives to required training, and trips to deposit tuition. Your home is your place of business, so these are business miles from the driveway, not commuting. You may use the IRS standard mileage rate for that year or your actual vehicle costs.
You need a log with the date, destination, and purpose. A trip that mixes daycare shopping with your own errands only counts for the business part. If you use the standard rate, gas, insurance, and repairs are already inside it and do not come off a second time.
Insurance for the daycare
Daycare liability coverage, the business rider your homeowners carrier adds because you operate in the house, and bonding if your state requires it.
Your base homeowners premium is not a separate write-off. It goes into the home pool at your time-space percentage. Your own health insurance is handled elsewhere on the return, not as a business expense.
Assistants and substitute providers
What you pay an aide, an assistant, or a substitute who covers you is deductible, along with the employer payroll taxes on it. Tell us before the first payday so the filings and the year-end forms are set up correctly.
If you set the hours, provide the supplies, and direct the work, that person is usually an employee rather than a contractor. Paying helpers off the books puts both your license and your return at risk.
If you run the daycare yourself, it belongs on Schedule C, and forming an LLC by itself does not change how you file. An S corporation only starts to be worth pricing when profit is consistently high enough to carry a real payroll, and it makes the daycare home deduction harder rather than easier, so we run your numbers before anyone elects anything.
What to bring us
You do not need all of it to start. Send what you have and your checklist shows what is still open.
- Attendance records showing the days and the sign-in and sign-out times for each child
- Your log of hours worked in the home with no children present, for cleaning, prep, records, and parent meetings
- Meal and snack counts by type, plus any Food Program statements showing what you were reimbursed
- All income for the year: cash, checks, Zelle and Venmo, state subsidy payments, grants, and any Form 1099-K a payment app sent you
- The total square footage of your home, which rooms the children use, and the square footage of those rooms
- Rent or mortgage statements, property tax bills, homeowners and liability insurance policies, and a full year of utility bills
- Your license, registration, or exemption paperwork, renewal receipts, and training and CPR certificates
- Receipts for toys, supplies, furniture, and any large purchase such as a fence, play structure, or appliance, with the date you started using it
- Your mileage log or the export from your mileage app
- Last year's tax return, plus the home depreciation schedule if you have claimed the home before
What trips people up
Treating cash and app payments as if they do not count.
Every dollar a parent pays you is income, whether it arrives as cash, a check, Zelle, Venmo, or a card. Report all of it. Parents report what they paid you when they claim the credit, and a payment app may send you a Form 1099-K, so your books should line up with both.
Skipping the home deduction because the playroom is also the family room.
Daycare has its own exception. Regular use is enough and exclusive use is not required, as long as you meet your state's licensing rules. Measure the rooms, track your hours, and take the deduction.
Guessing at hours, attendance, and meal counts at tax time.
These deductions are built on daily records. Keep one simple sheet with sign-in and sign-out times, the meals and snacks served, and the hours you worked with no children present. A minute a day is what makes the numbers hold up.
Handing your Social Security number to every parent.
Apply for an EIN, which the IRS issues at no charge, and put that on the Form W-10 you give parents. Your SSN stays out of other people's paperwork.
Setting nothing aside for self-employment tax.
Nobody withholds anything from tuition. You owe income tax and self-employment tax on your profit, usually through quarterly estimated payments. We will tell you what share of each payment to hold back based on your actual numbers.
What it costs
Our published list, the same one everyone sees. Prices marked "from" are starting points, and your exact number is confirmed in writing before any work begins.
$0 is due today. You pay when you sign, or you can have your fee come out of your refund, so it can be $0 out of pocket.
Questions we get from your trade
Do I have to be licensed to deduct part of my home?+
To use the daycare exception, the one that lets you skip the exclusive-use test, you need to have applied for, been granted, or be exempt from a license, certification, registration, or approval under your state's law. License-exempt is fine, and an application that is still pending counts. What does not work is having applied and been rejected, or having had a license revoked. We will look at how your state classifies your setup before we build the number.
Do the hours count when no children are in the house?+
Yes, when you are doing daycare work: cleaning, sanitizing, meal prep, setting up activities, record keeping, billing, and parent meetings. Write those hours down the day they happen. That log is the support for the time side of your home deduction, and reconstructing it in April is not the same thing.
Is my Food Program money taxable?+
Both sides get reported. Reimbursements for the children in your care are taxable to the extent they exceed what you spent on food for those children, and the food you serve them is deductible. Payments and expenses for your own children stay off the return entirely. We report the whole picture, not just the half that helps.
Can I deduct food and toys for my own kids?+
No. Anything for your own family is personal, even when it lives in the same toy bin and comes from the same grocery run. When an item is genuinely used by both, you deduct the business share at your time-space percentage.
A parent asked me to sign a form. What is it?+
That is usually Form W-10. Parents need your name, address, and taxpayer identification number to claim the child and dependent care credit on their Form 2441, and you are expected to furnish it. Get an EIN from the IRS, which is issued at no charge, and put that on the form instead of your Social Security number so your SSN is not sitting in a dozen households' tax files.
What happens to the home deduction when I sell the house?+
Depreciation tied to the business use of your home is taxed when you sell, even when the rest of the gain qualifies for the home sale exclusion. Not claiming it does not reliably protect you, because the rule looks at the depreciation that was allowable, not only what you actually took. So take it, keep the depreciation schedule, and tell us before you list the house.
Let us take the tax part off your plate.
Tell us what you need and see your price. A real person on your team replies within one business day.