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Daycare and Taxes>Deductions Totaling $3,337.85
katebethke 08:50 PM 02-02-2018
I just finished my record keeping for the short time I was in operation as a child care provider (opened doors Sept 28th) and my total deductions are upwards of $3,000! We finished out the basement and added a playroom and a nap room so the kids would have a place to play/sleep so those were the big expenses but I just feel like my deductions are a little too high for the short time I was in service.. I have a receipt to back up every purchase made but wondering if i'm missing something. Listed below is a breakdown of my calculations. If anyone sees any red flags with this, please advise!

UTILITIES DEDUCTION-$550.96(gas, electric, trash, etc.)
HOUSE DEDUCTION-$67.34 (home insurance)
MAINTENANCE DEDUCTION- $988.89 (playroom/nap room)
BUSINESS EXPENSE DEDUCTION-$1,445.39(supplies)
MILEAGE DEDUCTION -$285.26(based on .535 a mile)
MEAL DEDUCTION-$387.02(standard meal plan)
GRAND TOTAL DEDUCTIONS-$3,337.85
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Josiegirl 04:04 AM 02-03-2018
No red flags to me, especially if you're just starting out. There are always tons of start-up fees and costs making things child-care ready. But I'm sure Tom will know for sure.
Just wanted to add that for me, many of my first years doing child care, I ended up with 0 income due to deductions.
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TomCopeland 10:46 AM 02-04-2018
Originally Posted by katebethke:
I just finished my record keeping for the short time I was in operation as a child care provider (opened doors Sept 28th) and my total deductions are upwards of $3,000! We finished out the basement and added a playroom and a nap room so the kids would have a place to play/sleep so those were the big expenses but I just feel like my deductions are a little too high for the short time I was in service.. I have a receipt to back up every purchase made but wondering if i'm missing something. Listed below is a breakdown of my calculations. If anyone sees any red flags with this, please advise!

UTILITIES DEDUCTION-$550.96(gas, electric, trash, etc.)
HOUSE DEDUCTION-$67.34 (home insurance)
MAINTENANCE DEDUCTION- $988.89 (playroom/nap room)
BUSINESS EXPENSE DEDUCTION-$1,445.39(supplies)
MILEAGE DEDUCTION -$285.26(based on .535 a mile)
MEAL DEDUCTION-$387.02(standard meal plan)
GRAND TOTAL DEDUCTIONS-$3,337.85
All of these deductions meet the IRS definition of "ordinary and necessary" business expenses, so you are good. I assume that you are applying your time-space % to shared items such as utilities, insurance, maintenance, business expense above.
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katebethke 06:22 AM 02-05-2018
Utilities and House deductions were calculated using my t/s%, as for business expenses and maintenance- I claimed 100% because they were bought and used solely for child care. ( toilet paper, paper towels, sippy cups, cleaning supplies, etc.) The only item I applied a business% to was the playset because my son also uses. I calculated that percentage by business use hours/personal use hours.
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daycarediva 10:36 AM 02-05-2018
My first few years in business I made almost no 'profit', due to deductions..

Same with start up costs for my husbands commercial construction business.

Looks about right (maybe even on the low end)
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TomCopeland 12:46 PM 02-05-2018
Originally Posted by katebethke:
Utilities and House deductions were calculated using my t/s%, as for business expenses and maintenance- I claimed 100% because they were bought and used solely for child care. ( toilet paper, paper towels, sippy cups, cleaning supplies, etc.) The only item I applied a business% to was the playset because my son also uses. I calculated that percentage by business use hours/personal use hours.
In order to claim 100% of toilet paper and paper towels, you would have to be able to prove that your family never used the same bathroom, unless you changed the toilet paper rolls each time! So, if you have a bathroom exclusively used by your daycare kids, okay. Otherwise, use your time-space%. In any case, keep copies of receipts for all toilet paper, paper towels, etc. so you can show that you spent money on these items that were used personally.
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Mom2Two 12:26 PM 02-12-2018
Maybe I'm missing something...but I'm not seeing your home office deduction. That is usually a pretty big deduction. Also home depreciation.
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Tigerlilly 02:11 PM 02-12-2018
I was told I could not claim any deductions unless I could deduct $24,000 or more and I just do not see myself ever spending $24,000 a year on my daycare. Maybe I was told wrong?
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TomCopeland 11:11 AM 02-13-2018
Originally Posted by Tigerlilly:
I was told I could not claim any deductions unless I could deduct $24,000 or more and I just do not see myself ever spending $24,000 a year on my daycare. Maybe I was told wrong?
Wrong. What you are referring to is the question of whether to itemize on Schedule A or take the standard deduction of $24,000 for married couples. This has nothing to do with claiming deductions for your business. You can still deduct all your business expenses and take the $24,000 standard deduction.
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daycarediva 11:16 AM 02-13-2018
Originally Posted by TomCopeland:
In order to claim 100% of toilet paper and paper towels, you would have to be able to prove that your family never used the same bathroom, unless you changed the toilet paper rolls each time! So, if you have a bathroom exclusively used by your daycare kids, okay. Otherwise, use your time-space%. In any case, keep copies of receipts for all toilet paper, paper towels, etc. so you can show that you spent money on these items that were used personally.
I actually do this- my daycare bathroom is exclusive use M-F but on Saturday and Sunday my kids/their friends use it. Every Friday I clean it top to bottom, put a new TP and paper towel roll in there and on Monday morning I switch them out.
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Country Kids 11:21 AM 02-13-2018
Originally Posted by daycarediva:
I actually do this- my daycare bathroom is exclusive use M-F but on Saturday and Sunday my kids/their friends use it. Every Friday I clean it top to bottom, put a new TP and paper towel roll in there and on Monday morning I switch them out.
How would you prove this though if audited? I always wonder how the % use can be proved on these types of things.
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hwichlaz 04:56 PM 02-13-2018
Originally Posted by Country Kids:
How would you prove this though if audited? I always wonder how the % use can be proved on these types of things.
If you buy it on separate receipts they kinda have to take your word on it don't they? I mean ANYTHING I buy for daycare they could try to argue some friend's kid might visit and touch for a few minutes. There is no way to PROVE that they did or didn't.
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TomCopeland 12:50 PM 02-14-2018
Originally Posted by hwichlaz:
If you buy it on separate receipts they kinda have to take your word on it don't they? I mean ANYTHING I buy for daycare they could try to argue some friend's kid might visit and touch for a few minutes. There is no way to PROVE that they did or didn't.
Keeping personal and business receipts for supplies, etc is the way to protect yourself in an audit.
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Quiet Time 02:38 PM 03-23-2018
Maybe I'm doing this wrong, but I apply a TS% to almost everything I buy (except food and clothing). I have four kids of my own, but since 100% of my house is used for daycare, almost everything can be used by daycare. The ipod we gave to my son for Christmas plays music and white noise while the DCK nap, the bookshelf in my daughter's room I recently bought holds some DCK's books, etc...

I typically have less than $200 in items that are 100% day care expenses because my own kids could use almost anything I buy for DC.

I apply a TS% to almost everything and my supplies are typically around $8,000 and I'm only open 200 days a year.

So your total deductions seem a little low to me...or am I doing this all wrong?
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TomCopeland 08:55 PM 03-23-2018
Originally Posted by Quiet Time:
Maybe I'm doing this wrong, but I apply a TS% to almost everything I buy (except food and clothing). I have four kids of my own, but since 100% of my house is used for daycare, almost everything can be used by daycare. The ipod we gave to my son for Christmas plays music and white noise while the DCK nap, the bookshelf in my daughter's room I recently bought holds some DCK's books, etc...

I typically have less than $200 in items that are 100% day care expenses because my own kids could use almost anything I buy for DC.

I apply a TS% to almost everything and my supplies are typically around $8,000 and I'm only open 200 days a year.

So your total deductions seem a little low to me...or am I doing this all wrong?
You are not doing anything wrong. What other providers deduct should not be used as a guide to what you can deduct. When you buy something that is used by both your business and your family, use your time-space% and you'll be fine.
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lovemykidstoo 07:59 AM 04-06-2018
Originally Posted by TomCopeland:
You are not doing anything wrong. What other providers deduct should not be used as a guide to what you can deduct. When you buy something that is used by both your business and your family, use your time-space% and you'll be fine.
I definitely need more deductions. So far I have under the t/s utilities, homeowners insurance, taxes, cable/phone, Under my 100% I have business supplies (which I include training, items like cots/beds, bottles etc), gifts (which we can only do $25 per year per child right?), mileage, daycare liability insurance.

Reading through these threads. How do I categorize toilet paper, paper towels, paper plates, napkins, laundry soap because I was the bed linens, blankets etc, can I do dish soap, hand soap things like that that are non-food that we share with the daycare kids. Also thing for outside like salt to melt the ice, Anything else that I missed?
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TomCopeland 09:53 AM 04-06-2018
Originally Posted by lovemykidstoo:
I definitely need more deductions. So far I have under the t/s utilities, homeowners insurance, taxes, cable/phone, Under my 100% I have business supplies (which I include training, items like cots/beds, bottles etc), gifts (which we can only do $25 per year per child right?), mileage, daycare liability insurance.

Reading through these threads. How do I categorize toilet paper, paper towels, paper plates, napkins, laundry soap because I was the bed linens, blankets etc, can I do dish soap, hand soap things like that that are non-food that we share with the daycare kids. Also thing for outside like salt to melt the ice, Anything else that I missed?
The $25 limit per child only refers to gifts to children, not supplies. You can categorize expenses however you want. My book Family Child Care Record Keeping Guide lists over 1,000 deductions. See also my article: http://tomcopelandblog.com/whats-ded...-care-business
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lovemykidstoo 10:35 AM 04-06-2018
Originally Posted by TomCopeland:
The $25 limit per child only refers to gifts to children, not supplies. You can categorize expenses however you want. My book Family Child Care Record Keeping Guide lists over 1,000 deductions. See also my article: http://tomcopelandblog.com/whats-ded...-care-business
Thank you Tom. I definitely need your book!

I am stressing. My husband and I are both self-employed and he also works a regular job. He just called me and said we owe $9000!!!!! Help, I need to come up with some more expenses. I need to go through my checkbook and do something I"m not thinking of now. Where can I find more rightoffs? I didn't write off cleaning and laundry stuff before. How much does everyone do for that a year? Any ideas to get this amount down?
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lovemykidstoo 01:20 PM 04-06-2018
Originally Posted by TomCopeland:
The $25 limit per child only refers to gifts to children, not supplies. You can categorize expenses however you want. My book Family Child Care Record Keeping Guide lists over 1,000 deductions. See also my article: http://tomcopelandblog.com/whats-ded...-care-business
Thank you Tom. I'm going to buy your book! Can you tell me how t/s is figured? My tax person used 23% to take off on utilities, taxes ect, but I figured 28%. I wanted to see who did it right.
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lovemykidstoo 02:05 PM 04-06-2018
Originally Posted by lovemykidstoo:
Thank you Tom. I'm going to buy your book! Can you tell me how t/s is figured? My tax person used 23% to take off on utilities, taxes ect, but I figured 28%. I wanted to see who did it right.
Tom where is the best place to buy your book? Is there an online version I can buy?
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TomCopeland 03:18 PM 04-06-2018
Originally Posted by lovemykidstoo:
Tom where is the best place to buy your book? Is there an online version I can buy?
www.redleafpress.org; 800-423-8309
Here's the e-book: https://www.redleafpress.org/FCC-Rec...ook-P1200.aspx
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TomCopeland 03:20 PM 04-06-2018
Originally Posted by lovemykidstoo:
Thank you Tom. I'm going to buy your book! Can you tell me how t/s is figured? My tax person used 23% to take off on utilities, taxes ect, but I figured 28%. I wanted to see who did it right.
Here's an article about this: http://tomcopelandblog.com/the-time-...ercentage-quiz
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lovemykidstoo 07:41 PM 04-06-2018
Originally Posted by TomCopeland:
Here's an article about this: http://tomcopelandblog.com/the-time-...ercentage-quiz
This helps alot I think what she did was figured it at a 40 hour a week job. That would put me at 2080 hours in a year leaving it at 24% t/s ratio.

My actual working hours with kids was 2,428 hours, so that would be 28% correct? If I'm reading your link correctly, I can add on at least an hour a day for cleaning, prepping, paperwork. If I do that, since I worked 243 days, that would be another 243 hours. So that would increase my t/s % to 30%. Am I figuring it right?
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TomCopeland 09:08 PM 04-06-2018
Originally Posted by lovemykidstoo:
This helps alot I think what she did was figured it at a 40 hour a week job. That would put me at 2080 hours in a year leaving it at 24% t/s ratio.

My actual working hours with kids was 2,428 hours, so that would be 28% correct? If I'm reading your link correctly, I can add on at least an hour a day for cleaning, prepping, paperwork. If I do that, since I worked 243 days, that would be another 243 hours. So that would increase my t/s % to 30%. Am I figuring it right?
You can't automatically add an hour a day for cleaning, etc. You can add the hours you actually are working doing these activities when children are not present. It could be more or less than an hour a day. If you keep careful records for two months each year and use the average for those two months, you will be fine. Most providers underestimate their hours.
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lovemykidstoo 09:14 PM 04-06-2018
Originally Posted by TomCopeland:
You can't automatically add an hour a day for cleaning, etc. You can add the hours you actually are working doing these activities when children are not present. It could be more or less than an hour a day. If you keep careful records for two months each year and use the average for those two months, you will be fine. Most providers underestimate their hours.
I've always just used the hours the kids were in care, so I really am jipping myself. How do I record those hours, just use a notebook or something? What time can I record, recordkeeping, housework, shopping etc? I can't wait to get your book!!!! Any idea if Barnes and Noble carries it, I could go there tomorrow. So other than assuming an hour a day, are my calculations correct on t/s? Is there any way I could backtrack to last year and guestimate what I did extra to increase my t/s?

Can I add on the 8 hours I've logged doing all of my tax prep?
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Julia2 09:07 PM 12-31-2019
I rent the first floor for 1200 utilities included, how I rent to my daycare, I supposed this is another deduction, thank you
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TomCopeland 10:24 AM 01-02-2020
Originally Posted by lovemykidstoo:
I've always just used the hours the kids were in care, so I really am jipping myself. How do I record those hours, just use a notebook or something? What time can I record, recordkeeping, housework, shopping etc? I can't wait to get your book!!!! Any idea if Barnes and Noble carries it, I could go there tomorrow. So other than assuming an hour a day, are my calculations correct on t/s? Is there any way I could backtrack to last year and guestimate what I did extra to increase my t/s?

Can I add on the 8 hours I've logged doing all of my tax prep?
You can record these hours anywhere. I suggest putting them on a calendar. You want to record the time of day and what you did. You can count any time you are in your home when children are not present, doing something for your business that you wouldn't be doing if you weren't in business: cleaning, activity/meal preparation, record keeping, time on Daycare.com, tax preparation for your business, etc. My book is not in bookstores. Contact Redleaf Press.
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