This is probably the main message I’ve been spreading over the past thirty years to family child care providers across the country.
I’ve identified over 1,000 allowable business deductions in my book, Family Child Care Record Keeping Guide (9th edition).
But not every expense is deductible in your business.
Obviously, items that are not used in your business cannot be deducted. If you use a sewing machine to make items for the children in your care you can a deduct a portion of the cost of the sewing machine. But if another provider doesn’t use her sewing machine in her business she can’t deduct hers.
Here are some expenses that are never deductible as a business expense:
Club membership fees – Membership fees to Sam’s Club, Costco, health clubs, etc are not deductible. Membership fees in professional organizations are: National Association for Family Child Care, local family child care associations, Chamber of Commerce, The Child Care Business Partnership, etc.
Personal portion of tax preparation fees – The cost to have your business tax forms prepared (Schedule C, Form 8829, Form 4562, Form 1040SE, Form 3115) are deductible. Personal tax forms (Form 1040, Schedule A, etc.) are only deductible as an itemized deduction on Schedule A. Have your tax preparer break out these costs.
Estimated taxes – The estimated taxes you may be paying quarterly are not a business expense.
First phone line into your home – It’s not deductible even if you bought the phone to become licensed. You can deduct the business portion of a second phone line.
Parking or speeding tickets – Even if you are on a business trip!
Charitable contributions – These are deductible as personal itemized deductions. If you give money to a local softball team so they will put your name in their program, you can deduct this as advertising.
Personal clothing – Even though you may have special pants and shirts that you use only for your business they are not deductible because they aren’t a uniform. However, clothes that you wear for business that aren’t suitable apparel outside your home are deductible. This would include smocks, story time aprons, or clown outfits. Sweatshirts or T-shirts that display a family child care logo or message are deductible as advertising. Clothing you buy for the children in your care are also deductible: mittens, caps, coats, etc.
Pet care – Don’t try to deduct expenses for your dog or cat unless it’s for a leash or fence to keep them away from the children. Fish, gerbils, birds, turtles or other animals that you use to help educate children may be deductible. See more.
Bad debt – If a parent leaves owing you money, you cannot deduct this as an expense. Instead, report only the income you actually received and pay taxes on this lower amount.
Tom Copeland – www.tomcopelandblog.com
Image credit: https://www.flickr.com/photos/chriswejr/
For more information, see my Family Child Care Record Keeping Guide (9th edition).