If you earn any money at all caring for children in your own home, you are running a family child care business. You must report all your income on IRS Form Schedule C. If you are exempt from your state's child care licensing laws you can deduct all the same expenses as a licensed child care provider.

If you are in violation of your state's laws then you cannot deduct house expenses (property tax, mortgage interest, house insurance, house repairs, utilities and house depreciation) but you can claim all other expenses: food, toys, supplies, furniture, appliances, car expenses, etc.

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