How to organize your Childcare business expenses:
Home-based Childcare have a unique set of rules when it comes to filing your tax returns. We have been providing nearly 20 years of teaching these rules to providers in support groups, food programs, Resource and Referral agencies, and other child care provider's groups.
Income: $________________
Advertising (Balloons, bumper stickers, business cards, buttons, flyers, newspaper ads, rubber stamps, signs, T-shirts, tote-bags, and other forms of advertising. $________________
Automobile expenses
The primary purpose of the trip needs to be business related. Trips could include; bank trips, taking children to and from school, field trips, medical visits, & buying food or supplies.
Standard mileage rate; Miles Driven: Business ____________ Personal ____________
In addition to either method you can also deduct parking and tolls.
Caution! Section 7D Chapter 90 of the Massachusetts Motor Vehicle Laws mandates that if a child is being transported in a “fixed route” on a regular basis the School Pupil Transportation rules apply to child care providers. This means if you regularly drive a/several childcare child(ren) to activities (ei M, W, F) then should get a special license plate for the vehicle.
This does not apply to transporting your own children on a fixed route. Careful review of Chapter 71b Section 1, Chapter 90 Section 1 & 7d, and Chapter 151 Section 235 in the Massachusetts Motor Vehicle Laws will assist you in applying the appropriate rules.
Subcontractors (an assistant who is working for you and other providers on an irregular basis) $________________
Insurance (General liability insurance, additional fees added to homeowner’s policy, riders added to existing policies.)
$________________
Interest (Personal interest generally is not deductible however if the interest is directly related to a purchase for the business this interest is an allowable deduction.) $________________
Legal and professional expenses (Accounting, bookkeeping, legal costs, preparation of the business part of the tax return.) $________________
Office expenses (Bank charges, business management books, business forms, calculator, calendar, computer software, envelopes, ledger, magazines, note books, paper, parent contracts, pencils, pencil sharpener, pens, photocopying, postage stamps, receipt pads.) $________________
Rent of business equipment (Carpet cleaning machine, computer games, game cartridges, and VCR or DVD movies.) $________________
Repairs and Maintenance (Directly related to the business) All other repairs is discussed on the third page of this document. $________________
Supplies (This is a general category that includes items listed on next page.) $________________
Taxes and Licenses (Licensing fees, payroll taxes, zoning permits) $________________
Utilities (Telephone expenses for a second line, area discount service, call waiting, (only expenses incurred as a direct expense, most Utilities will be reported on Form 8829)) $________________
Wages (Wages paid to a worker, including family members providing bona fide services.) $________________
Craft supplies (Chalk, construction paper, crayons, feathers, paint, pompoms.) $________________
Gifts (Gifts to the children, siblings, and parents are limited to $25.00 each.) $________________
Field trips (Admission costs) $________________
Food (Only items consumed by the children cared for or any employees. Do not include food eaten by the provider or the provider’s family! (See note on last page) $________________
Training $________________
Toys (Toys can be a significant expense. Do not include toys bought for family members!) $________________
Supplies - Below are listed items that commonly would be included in this category.
Air freshener Diaper pail Rattles
Aluminum foil Diapers Rug cleaner
Aprons Dishwasher detergent Salt for water
Art supplies Dress-up clothes Sand
Baby wipes Easel Scissors
Balls Fabric Silly putty
Balloons Finger paint Sleeping Mats
Batteries Flannel board Soap
Bib Flash light Sponges
Blankets Frisbee Stain removers
Bleach Garbage bags Stencils
Blocks Glue Stickers
Board games Hair brush Stuffed animals
Bowls Hand soap Tape
Broom Hand cream Tape recorder
Bucket Holiday decorations Tetherball
Cassette tapes Ink for printer Thermometer
Chalk Jump rope Tissue
Changing pad Kite string Tissue paper
Charcoal Laundry supplies Toilet paper
Children’s books Markers Toilet bowl cleaner
Clay Note pads Toothbrush
Cleaning supplies Ointment Toothpaste
Clothes pins Paper cups & towels Utensils
Cook book Paste Vacuum cleaner
Cookie sheets & cutters Pillows Video tapes
Cooking timer Plastic bags Wading pool
Comb Puppets Wash cloths
Construction paper Puzzles Xylophone
Cutting board Quilt Yo-yo
Business use of your home: Hours Open: ________________
Square footage of home: ________________
Area used for Childcare: ________________
Deductible Mortgage Interest (Allowable, Schedule A, home mortgage interest must be apportioned between business use and personal use. Personal use belongs on Schedule A.) $________________
Please have mortgage statement with you.
Real Estate Taxes (Allowable, Schedule A, Real Estate Taxes must be apportioned between business use and personal use. Personal use belongs on Schedule A. $________________
Please have mortgage statement or other info with this amount with you.
Homeowners insurance (The cost of the home insurance policy belongs here.)
$________________
Repairs and Maintenance (Work done to the home including light bulbs, paint, snow shovels, ect.)
$________________
Utilities (Cable television, electric, heat, sewer, trash removal, and water are all included in this category.)
$________________
Other expenses (Rent for an apartment would be reported here.)
$________________
Depreciation of the home
Every provider will benefit financially if they depreciate their home. When a childcare provider sells their home, they must recapture any depreciation they were entitled to claim, whether or not they actually reported it on their tax return. You are going to depreciate the cost or fair market value of the home which ever is lowest, less the cost of the land the personal residence sits on.
Cost of home: $________________
Value of land: $________________
Capital expenses
Items, which have a life over one year, should be depreciated. Common items depreciated include:
Computer, fence, home heating system, swing set, major improvements, microwave, refrigerator, stove, typewriter, television, and video cassette recorder are a few. In addition household inventory including furniture, kitchenware, tables, chairs, wall hangings, carpeting which are used both for the business and personal. Fair market value needs to be determined on all items that were owned before the business was started. Items, which are shared, need the Business Use of the Home percentage assigned to them unless a more accurate method is used to determine the business use portion.
* New method to calculate food:
Substantiation of the cost of meals furnished by Childcare Providers is a substantial burden to accurately keep track of for business food expense. It is extremely time-consuming for family Childcare providers, particularly when the food purchase must be allocated between business use and personal consumption.
To reduce this burden, in 2002 the IRS provided guidance to establishing a standard meal allowance rate allowing the Childcare Provider to choose between the standard allowance or the actual expense methods for claiming their food expense. You are now allowed to base your food expense on the number of servings in each category of food you actually feed the children as follows:
Breakfasts _____ AM Snacks _____ Lunches _____ PM Snacks _____ Dinners _____ Eve Snacks _____
{ I will calculate the dollar amount for food based on the information you provide above and the IRS allowances. } You are required to keep a log of the servings fed to the children.
The standard meal allowance rates for 2006 are $1.06 for breakfast, $1.96 for lunch and supper, and $0.58 for snack.
