Kids are awesome, but they can be expensive. If you run a daycare, preschool, or after school program, you’ve probably spent a lot on things like food, toys, furniture, and cleaning supplies. Well, we have good news: most of that is tax deductible! Here are all the things you should be sure to deduct on your tax return if you run a childcare facility.
Employee wages
Do you have employees or staff? If so, you can deduct their wages or salaries, benefits, PTO, and insurance from your taxes. Unfortunately, you can’t deduct your own wages.
Childcare supplies
One of your biggest expenses is probably childcare supplies, from toys and craft materials to diapers and cleaning wipes. Luckily, you can deduct pretty much all of these, as long as you’ve held on to your receipts.
Here are some common childcare supplies that are tax-deductible:
- Cleaning supplies
- Toys, games, and books
- Art supplies and craft materials
- Furniture
- Diapers, wipes, and other infant supplies
- Kitchen supplies
Office supplies
Chances are you’ve also spent money on things like paper, pencils, and other office supplies. If a business expense is “ordinary and necessary,” then the IRS allows you to deduct it from your taxes. So gather up those receipts from the year and add up everything you spent on supplies like the following:
- Paper
- Ink
- Stamps and envelopes
- Pens and pencils
- Office technology
- Binders, folders, and notebooks
- Planners and calendars
- Staples and staplers
- Tape
- Rubber bands
- Paper clips
- Scissors
- Bookshelves and filing cabinets
Large expenses
Let’s say you spent $15,000 on buying and installing a new jungle gym, can you deduct that from your taxes? Yes, but you may want to be careful about just how you deduct it. In tax terms, an asset that increases the value of your business is known as a capital expenditure. These are usually things that come at a large cost but will continue to be used for years. These expenses usually aren’t “ordinary and necessary,” so they aren’t deducted like other business expenses. Instead, they’re deducted over a period of years, using depreciation. How much you deduct each year and how many years you’ll continue to deduct for this expense depends on what you bought and how long it will remain in good condition.
Food and drink
Kids can eat. A lot. So you’ll be happy to know that, if you provide meals or snacks for the children at your facility, you can deduct that as well. Just be sure to hold on to your receipts, track attendance, and record the number of meals you serve throughout the year, so you can easily calculate how much you spent on food and drink.
Business use of home
If you run your childcare business out of your own home, you may be able to deduct part of your mortgage or rent on your taxes. And yes, that also applies to utilities and homeowners insurance.
Other expenses
You may also be able to deduct other businesses expenses that pertain to your business, such as:
- Vehicle and travel expenses
- Bank fees and interest
- Advertising expenses
- Membership dues