Running your daycare business from home can be a satisfying, but also stressful experience. Not only that, but you also have to manage all your bookkeeping, including tracking your potential deductions. While it is important to consult with a tax professional or accountant, such as James Wells EA MBA Tax Office in Santa Cruz, CA, regarding potential deductions, here are a few that you want to be sure not to miss!
Remember that your principal place of business is your home. Therefore, all the aspects of your home office and the expenses incurred may be eligible for deduction. Keep in mind that you may also be able to deduction expenses from your home, based on the square footage of your home office within the home. This home office area would also include the area of your home devoted to the care of the children.
You will also want to track the expenses for utilities and other home uses during the hours your business is in operation, as they would all be expenses of your business. This would also include all water and gas or propane in use during the day for your business.
These expenses would be the type of expenses common and necessary to your particular industry. Therefore, you want to be sure to expense these types of items, such as toys, additional sleeping mats or even cribs. There may also be other supplies that you will need to include under this category based on your specific business model. Working with your tax professional, you can then determine what would qualify as a deduction under this category.
While every business has specific equipment for its operation, this is even more apparent for those who are in the daycare industry. Equipment can include playground equipment, sleeping areas, and even kid-friendly dishes. You can also include any safety devices for stairs, cabinets and even your electrical outlets.
You may also purchase the necessary items to maintain hygiene or to deal with basic first aid emergencies. All of this would be considered necessary equipment for the performance of your business. Just be sure to keep dated receipts of all expenses for your records, both for your tax return, but also to verity these expenses in the case of an audit.
As a daycare provider, you may also have organized educational activities as part of your daily routine. These can include reading sessions, building toys or other educational toys that encourage learning. All your activities and the supplies for them may also be tax deductible. As a result, when planning and shopping for your activities, be sure to track your receipts for these expenses.
While there are a variety of potential deductions that we have already covered, there are also deductions for your professional expenses. If you are part of an organization specific to your industry, the dues may be deductible. If you have any specific magazine subscriptions for your industry or other continuing education expenses, these should also be tracked as part of your business expenses.
In addition, you need to be sure to keep track of any money that you expend for licensing, making your home meet the necessary codes or any other expenses involved in the general running of your business. If you have to attend any conferences, then you can also potentially deduct all the travel expenses, as well as registration fees. Travel expenses would include gas, parking, tolls and even food and lodging.
As you can see, there are a variety of potential deductions available for those individuals who choose to run a daycare business. The most important thing to remember is that you need to be a proactive record keeper. Make a habit of collecting your receipts on a weekly basis, updating your accounting records and then filing the, away. This will make your visit with your tax professional even easier around tax time, which can save you time and money.
In addition, there may be other deductions that your business qualifies for. By working with your tax professional, you can determine what your specific circumstances qualify you for in terms of credits and deductions.
Click on the link below to connect with a tax professional of accountant at James Wells EA MBA Tax Office in Santa Cruz, CA, who can assist you in determining what deductions you qualify for but also how to maximize your deductions for a reduced tax liability throughout the year.
James Wells EA MBA Tax Office