Home Daycare Businesses - A Special Case for Taxes
In the past few days, I have been talking about home business taxes and how to take a home office deduction by determining the percentage of your home that is used for your business and collecting the information about home office expenses. Today I’ll let you know about daycare businesses, which are a special case.
Determining the percentage of space. First, the “exclusively” section of the requirements for deducting home business section doesn’t apply to daycare businesses. The portion of your home that you use for daycare doesn’t have to be exclusive. I guess the IRS figures you can’t possibly keep toddlers in one area - they need to use the bathroom and be in the kitchen. To qualify for this deduction, you must be a licensed facility.
By the way, “daycare” can also include care for elderly (over age 65) and those unable to care for themselves, as long as you are a licensed facility.
Determinging percentage of time. In addition to figuring what percentage of your home space is used for your business, as I outlined earlier this week, you must also determine what percentage of the time this space is used for daycare purposes. Let’s say you have children in your living room during the day, from 6 a.m. to 6 p.m. That’s half the day, 5 days a week, or 60 hours a week, out of 168 hours a week, or about 36 percent of the time. You don’t have to use the room absolutely exclusively during the day; you can’t shut your family out of the room.
If you serve meals at your daycare facility, the expenses for those meals go on your Schedule C for your business profit/loss, along with your other regular business expenses.
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