Are Christmas Gifts To DCK & DCM's Writeoffs?
 

Can we write off any gifts we give to either the parents or the kids? And what about if I make them pumpkin bread or cookies to take home, can I write them off as gift expenses? Like would I write off cookie dough $2.00 as a gift??

Secondly, if I recieve Christmas gifts from parents, I have to claim them as income, correct? What if they make me cookie? Do I claim $2.00 as income?

The answer to your 2nd question first (from Tom's 2009 Tax Workbook & Organizer, pg111-112, summarized): You must report any cash or gift certificates that you receive from the parents of children in your care as business income, even if the parent considers it a gift/bonus. Report these gifts on Sched. C, line 1. If a parent gives you a gift in part or total payment of child care services, then the item isn't really a gift and must be reported as income. You don't need to report non-cash gifts (except gift cards) as income. If you use a gift item in your business, you can depreciate it as a business expense.

To answer your first question: I found the following in an article at: http://www.familychildcaretaxes.com/...re-070214.html

Tom would argue that gifts for your day care children are not the same as regular business gifts, which are limited to $25 per person per year. Birthday parties are required activities for a family child care business and he suggests deducting gifts to the kids as an activity expense. Gifts to parents or others must still be limited to $25 per year. Be sure to differentiate when documenting your gift expense.

I thought there was a post about this on the forum, but I couldn't find it when I did a search. Keep in mind that tax laws change every year and the above that I copied was from 2007. I couldn't quickly find a reference in the 2009 book. As far as making something for the parents, I would have the kids help and then it is definitely an activity expense.

In Tom's current book you can give a $25 gift to each person (mom, kid, dad, etc). Also in his book, if you buy a toy for a kid and he opens it at your house let's say at a party then you can count it as activity but if he opens it at home then it is a gift. Hope this helps.

Originally Posted by kitkat:
Birthday parties are required activities for a family child care business and he suggests deducting gifts to the kids as an activity expense.

Hmm.... this may have answered one of my questions, too. Up until now, I've been buying birthday gifts for each of my day care kids but it's getting expensive. I"ve been thinking about creating a "Birthday Box" instead. I thought I could maybe buy small, inexpensive toys and books here and there when I see them at the store and put them in my "Birthday Box". When a birthday comes along, I was thinking the birthday child could pick one gift/book from the "Birthday Box". Would this fit as an "activity expense"?

I am on brain overload right now, and still am confused...

I'm not licensed so I am not required to have bday parties or anything, so am I correct in understanding that Christmas gifts i can write off for kids and parents up to $25?

I'm not licensed either. Parties are not "required". I think the arguement being made in the article was to show that in our setting, parties/gifts are different than in a typical business setting. As long as you are legally not licensed, you are able to deduct the same things as someone who is licensed. So yes, the limits are the same.

Ok, so then I can write off gifts to kids and parents as long as they are under $25? And this is per yr?

Originally Posted by legomom922:
Can we write off any gifts we give to either the parents or the kids? And what about if I make them pumpkin bread or cookies to take home, can I write them off as gift expenses? Like would I write off cookie dough $2.00 as a gift??

Secondly, if I recieve Christmas gifts from parents, I have to claim them as income, correct? What if they make me cookie? Do I claim $2.00 as income?

I will have to look this up in the book sometime to explain it and make sure I'm right too.....just another reason to make crafts for gifts! :D That way, it would always just be an activity expense that you send home.

Normally you would already claim the $2 in cookie dough under your activities expense (if you involve the kids in making it) or else it would be a food expense. Gifts are up to $25 value per person in each family. If you send it all out to families it would be considered a gift.

Gifts
 

I wrote a recent blog post on this: http://tinyurl.com/2bzb38q