Understanding Expense Categories for Family Child Care Providers
A common question from family child care providers is, “What expense category should I use for ________?” This often arises when organizing expenses in software, preparing tax returns, or getting records ready for a tax preparer.
The Key Takeaway:
It doesn’t really matter which expense category you assign to a purchase!
All of your business expenses will eventually end up on IRS Form 1040 Schedule C, and regardless of where a specific item is categorized, it won’t affect how much tax you owe.
Suggested Expense Categories
For those looking for some structure, here’s a list of commonly used expense categories organized by where they appear on tax forms. This can help make it easier for you or your tax preparer to transfer your expenses when filing.
Schedule C Expense Categories:
Advertising
Car/Truck Expenses
Contract Labor (For non-child care-related services)
Business Liability Insurance
Credit Card Interest
Legal/Professional Services (e.g., legal fees, tax preparation)
Office Expense
Equipment Rental (Excluding vehicles)
Repairs/Maintenance (For items unrelated to your home)
Supplies
Taxes/Licenses (e.g., business licenses, payroll taxes)
Travel/Meals (For work-related travel)
Wages (For employees, not contractors)
Additionally, child care-specific categories include:
Food
Household Items
Cleaning Supplies
Activity Supplies
Toys
These categories are designed to cover expenses unique to child care businesses and can be entered under “Other Expenses” on Schedule C.
Home-Related Expenses (Form 8829):
Real Estate Taxes
Home Insurance
Rent, Repairs, and Maintenance
Utilities
Home Depreciation (Form 4562)
For smaller purchases, such as computers or furniture costing less than $2,500, these can be listed under "Other Expenses" on Schedule C, rather than depreciated over time.
Organizing Your Records
Having clear categories can help you keep your records organized and ensure that your expenses are easily transferred to the appropriate tax forms. Whether you categorize your expenses exactly as outlined here or customize them to suit your needs, the most important thing is to maintain accurate records to streamline the filing process.
