Daycare Tax Tips

Are my education costs deductible? Can I count the class and homework time?

The answers to these questions are surprisingly complicated

A family child care provider writes:

> I am taking some classes to work toward a teacher's certification and possibly an AA degree. Are the hours I spend in school or studying able to count toward my total work hours when calculating my time/space percentage? Can I deduct the cost of tuition and books as a business expense?

Hours you spend at school, or otherwise away from home, don't count. Hours spent at home studying or doing homework may count, but only if the education cost qualifies as a business expense. Figuring that out is actually pretty complicated. I recommend you read Tom Copeland article entitled When Are Education Costs Deductible?

To summarize:

If you already have a post-secondary undergraduate degree of some kind, then tuition, books, and other class costs, as well as time spent studying at home, can be counted for tax purposes.

If you do not already have a degree, then the class cost/time cannot be counted if you are in a degree program.

If you are taking classes without the intent to get a degree, the cost/time can also be counted, but I never know what to say when a child care provider says she might get a degree. It could depend on when you change your mind about it, but somebody should ask Tom Copeland about this!

By the way, if your education costs are determined to be deductible, you can also take an auto deduction based on your mileage to and from school.


Previously, Tom Copeland has also written that if a provider receives a grant or scholarship (TEACH, etc.) to take training classes or attend business conferences, the money received is taxable income. But you can also deduct the cost of the conference or classes you take. If the grant does not cover the full cost of the training, you can still deduct the full cost. If you never actually receive the scholarship (the granting organization pays for the training directly), you should still report this as income and claim the cost of the training as an expense.

For additional information, see IRS Publication 970 Tax Benefits for Education.

Last updated 14 September 2011

Posted on 2011-09-15 06:21:05