Daycare Tax Tips

Track Child Care Work Hours in the Home

Protect and boost your home expense deduction

Total business work time in your home makes up half of the time/space percentage, which determines how much of your home expenses (rent, mortgage interest, utilities, etc.) and other shared expenses can be treated as a business tax deduction on your income tax return. (A shared expense is the cost of any product or service that is used for both business and personal purposes.) To protect and make the most of these tax deductions, you must determine the total number of hours during the calendar year when child care work was being done in your home. This means both hours caring for children and hours taken up with other business-related tasks.

You can record child care work hours on a simple calendar, use KidKare software (former known as Minute Menu), or any way you like. Don't count any work-related time away from home, however, such as time spent doing business shopping or attending classes. Record your auto miles or other transportation cost instead.

Do count time your spouse or other helpers work outside of regular hours...but not if they overlap your own hours. In other words, don't count any work hours twice. If you are planning meals for an hour and your spouse is doing business bookkeeping at the same time, count that hour only once.

Keep attendance records with "Time In" and "Time Out" entries for each day care child to document the hours spent caring for children. In addition, track hours worked when children are not present. You most likely work many hours before children arrive, after they leave, and on weekends. Keep track of time spent on business-related cleaning (it's probably business related if you wouldn't be doing it otherwise), meal and activity planning, record keeping, talking to parents (in person or over the phone), etc.

In the words of Tom Copeland: It's not necessary to track after hours work time every day, but I strongly recommend that you do keep records for at least two months a year and use the average for these months for the rest of the year. If you haven't yet tracked these hours for the current year, start now. If it is close to or after the end of the year, track your hours now for two months (before preparing your income tax return) and then again later in the year for next year's taxes.

Last updated: 17 September 2011

Posted on 2008-08-15 20:12:40