If You Give a Discount to a Parent, Can You Deduct It?

The short answer is “No.”

Family child care providers sometimes offer discounts or scholarships to parents to help them afford their child care services.

For example:

* A provider gives a parent a $100 discount on her services because the parent lost her job.

* A provider gives a parent a $300 scholarship by forgiving the amount the low-income parent was supposed to pay her as a co-pay.

* A provider gives a parent a reduced fee of $50 on the first week of care as an incentive for the parent to enroll in her program.

* A parent leaves a provider owing her $700. The provider decides not to try to collect from the parent.

* A provider has a child of her own in care. This child takes up a space that would normally mean $160 a week in income.

In all of these situations the provider cannot deduct the amounts involved as a business expense.

Instead, the provider will report less income on her taxes, and pay less in taxes as a result. Only report as income money that you receive. Do not deduct money that was owed to you and not paid or amounts that you offered to reduce your rates as a discount or scholarship.

Have you offered discounts or scholarships to parents, and if so, why?

Tom Copeland – www.tomcopelandblog.com

Image credit: https://www.pngkit.com/bigpic/u2q8r5a9q8y3i1i1/

For more information, see my book Family Child Care Record Keeping Guide.