Family child care providers can deduct all “ordinary” and “necessary” expenses for their business.
Thus, it would seem like deducting the cost of food served to helpers/employees* would be a simple matter.
However, there are a few things to point out:
1) You can deduct 100% of the cost of the food served to your helpers/employees if it’s served to them at your place of business and during your work hours. If the children leave at 5 pm, and you serve food to them at 5:30 pm, it’s not deductible because the food no longer serves a business purpose. However, if you had a meeting with your helpers/employees at 5:30 pm to discuss work issues, then it would be 100% deductible.
2) If you are not paying someone to help you care for children, you could still deduct 100% of the cost of the food served to such volunteers. However, don’t deduct food served to your spouse or own child who works for you unless you are paying them during the hours they are caring for children.
3) If you take your helpers/employees out to a restaurant, you can only deduct 50% of the cost of the food. If you have a meeting with your employee(s) in your home after daycare hours and order pizza to be delivered, you can deduct 100% of the cost because it’s eaten in your home.
It’s not clear to me how you should treat food eaten by your helper/employee on a field trip with the children. Because they are eating food from you home, maybe you can deduct 100% of the cost. However, because it’s eaten away from you home maybe you should still only deduct 50% of the cost. The rules are not clear on this point.
4) You can deduct 100% of the cost of donuts, soft drinks, coffee served to helpers/employees during your work hours.
5) If you have a party/celebration/event in your home in which helpers/employees are present, deduct 100% of the cost of the food. If it’s away from your home, deduct 50% of the cost of the food.
6) The value of the food you serve to helpers/employees is not taxable income to them.
How to determine the cost of the food
When you serve food to helpers/employees in your home you can determine the cost of the food in one of two ways. First, you could keep food receipts. This can be a challenge to determine when food is also eaten by others (the children, you and your own children). (Food eaten by your own children is never deductible.)
Second, you could use the standard meal allowance and deduct this food cost, without needing to save any food receipts. The standard meal allowance for 2017 is $1.31 breakfast, $2.46 lunch/supper and $.73 snack. It’s probable that the cost of food eaten by helpers/employees is more than these amounts, but at least you don’t have to worry about food receipts.
Note: When the standard meal allowance rule was written, it did not include employees as being eligible to use this rule. However, before this rule, many family child care providers used the Food Program meal reimbursement amount as a reasonable estimate of their food costs and this was accepted in all IRS audits I saw. Therefore, I think it’s reasonable to use the standard meal allowance rate for employees, recognizing that it’s probably a conservative estimate.
Tom Copeland – www.tomcopelandblog.com
* I’m using the word “helpers” and “employees” in the same way. This would also include independent contractors (serving food to someone cleaning your home or offering a music lesson to the children in your care, etc.).