Ask Tom

Question: May I deduct the food cost if my daycare helper and I eat a meal at a restaurant?

Yes, you can deduct 50% of the cost of the food for a business meal. You should keep the receipt, write down the name of the person you had the meal with and write down what you talked about. The primary purpose of the meal needs to be business related, so describe what you talked about in a paragraph.

Here’s an article I wrote about this:

Question: A parent left owing me $250 for 2015 child care. Can I deduct this as a loss?

No. Money you don’t receive from parents is not a business loss you can deduct. Whether you call it a scholarship, a discount or money the parent owes you, it’s not an expense. Because you received less income than you planned, you will pay lower taxes.

Question: If a parent pays me for January care in December, what year do I report it as income?

You report income in the year you receive it. So, a check you receive in December is income for December, not January. This is true even if you don’t deposit the check until January.

Question: May I ask for 5 paid professional days?

Absolutely! Many family child care providers get paid time off, and not just for holidays and vacations. It’s reasonable to ask for paid time off to attend conferences and workshops or to attend a funeral or other family emergency. If you are going to add this to your contract, you might say, “Provider will take up to five paid professional days each year to attend business conferences and workshops or for personal reasons.”

Question: A parent gave me a gift card. May she claim that towards her child care tax credit?

No. Parents can only claim the child care tax credit with money they spend to enable them to work or go to school. This gift card to you isn’t directly for child care services, so it doesn’t count towards the credit.

Question: Can I count miles when my husband picks up milk on the way home from work?

To claim business miles the primary purpose of the trip must be for your business. So, when your husband drives home his primary purpose is to get home, not to buy milk. However, if he drives extra miles to get the milk, the extra miles do count. So, if his normal commute is 10 miles one way, and he drives 2 miles out the way to get milk on his way home, you can count 2 miles as business miles.

Question: Can I charge a very low rate to attract parents and not report it as income?

No way. Any money you receive from parents is taxable income. A few family child care providers try to avoid paying taxes by not reporting their income. They get parents to agree not to claim the child care tax credit in exchange for charging them a very low rate. Trying to hide from the IRS won’t work. If you try this you are setting yourself up for penalties and interest when you get caught.

Question: May I claim a tax credit for caring for my own child?

No. Some family child care providers believe that if their husband pays them to care for their own child they can claim the federal child care tax credit. The Instructions to IRS Form 2441 Child and Dependent Care Expenses makes this clear.

The fact that you are caring for your own child means you don’t have to pay child care costs. Yes, your child is taking up a space in your program, but there is no tax benefit for this.

If you enroll your child in another child care program while you are working (attending a workshop, conference, etc.) you can claim the child care tax credit for this cost. However, you won’t reduce your own taxes by an amount equal to the cost of this care, so it’s not beneficial tax-wise to do this.

You cannot claim the child care tax credit by paying your own spouse or dependent child to care for your child while attend a workshop or conference.

Question: I’m not on the Food Program. Can I deduct meals served to my own children during day care hours?

Nope. Food served to your own children is never deductible as a business expense, whether or not you are on the Food Program.

If you are on the Food Program and are receiving reimbursements for your own children, these amounts are not taxable income. But, you still cannot deduct the expenses for serving food to your own children.

All family child care providers will be better off financially if they join the Food Program!

See my article “Will Your Food Deductions Be Lower After Joining the Food Program?”

Question: Can I refuse to care for a child who is not potty trained?

Yes, as long as the child doesn’t have a disability that affects their ability to be potty trained. In other words, if the child’s disability is the reason why she is not potty trained you cannot immediately refuse to provide care.

Instead, you would need to see how you could provide a reasonable accommodation to care for the child. It may or may not be possible to provide care in your situation, depending on the needs of the child and the number of other children in your program.

Also, if you do accept the child who is not potty trained, you cannot charge the parent more for doing so.