Daycare Tax Tips

Providers who are not licensed may miss out on the home expense deduction

But other business expense deductions are allowed

A family child care provider writes:

>I am thinking of doing daycare out of my home for one family in Minnesota. I would like to know if I need to be licensed in order to claim expenses as deductions on my taxes?

I am only familiar with licensing rules in California, so I don't know if Minnesota requires you to be licensed when caring for the children of only one family. You should find out, because the answer will affect your tax deductions. California does not require a license in this situation.

If you are NOT required to have a license because you are doing day care for only one family, then for tax purposes you follow all the same rules as licensed providers. You can deduct all the same business expenses, including a percentage of your home expenses (rent or mortgage interest, utilities, repairs, etc.) on Form 8829.

If you ARE required to have a license, but choose not to apply for one, you can deduct all of the same business expenses on your tax return, except that you cannot deduct any home expenses.

The Instructions for Form 8829 put it this way: To qualify to deduct a portion of your home must have applied for (and not have been rejected), been granted (and still have in effect), or be exempt from having a license, certification, registration, or approval as a daycare center or as a family or group daycare home under state law.

Posted on 2009-08-31 21:32:25