Lighten The Load With Daycare Tax Deduction

If you own a day care business in your home, you could be eligible for a deduction on your daycare tax. Even if your business is within your home, this deduction is still available for you.

Nevertheless, you must know what qualifies as daycare. You are in the daycare business, when you give care to children or individuals incapable of looking after themselves due to physical or mental impairments. To run a daycare business, you need some valid certifications or exemptions. You are not eligible to run a daycare centre however, if you have had your license revoked or application rejected.

Before calculating your deductions, bear the following in mind. Firstly, you are entitled to deductions which are related to the space from where you work, in this case your home.

Secondly, you must find out exactly what space in your house you use for business purposes and also the frequency. If you use all the space for business, you will be eligible to subtract all costs. But, if the use is only business in part then you will have to state which percentage of the total use is for business.

This doesn’t imply that you will have to constantly maintain records. For example, if you run a children’s crèche in your basement, for x hours a day, on weekdays, you can make personal use of the basement the rest of the time, you will still be eligible to show the time used and claim your deductions. However, if you only use the basement for occasional babysitting, you cannot claim it as an expense.

Also, all expenses related to the maintenance and upkeep of these rooms should figure in your expense list. For example, if along with the basement you use another room in your house (where children go to sleep). This room will also qualify as an expense head and can be eligible to show up on your deduction.

Another claim for deduction (if you qualify as a family daycare provider) is for expenses for preparing meals and snacks. If you some people helping you, you can subtract 100% of their food cost as expense, unless their salary doesn’t include a food component. If you provide food to your employees, in order to claim deduction, you will need to keep track of consumption and show that it is only for the daycare centre. This can be quite tricky, though. So we advise to show a standard rate for all meals and snacks as expense, and then claim deduction.

You can apply standard rates per person for breakfast, lunch, dinner as well as three snacks per day. These rates can include drinks but no other non-food material that could be required for the food preparation. All the equipment for food preparation can be claimed as a separate expense.

With a little care, your business can be less taxing. So plan ahead and save some money!

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