Daycare vs Babysitter - Any Tax Differences?

[Unregistered]

I may have an opportunity come up for employment through a company for an unrelated occupation. If that happens, I will turn in my Childcare license. I have several children in my care, I would have all but one find other arrangements and keep one as that child is family. During the day, we would still do activities, just with the freedom to leave the house! I plan to claim the income on my taxes, would I still be able to claim expenses? Including use of the home?

[TomCopeland]

babbysitter vs. provider

I may have an opportunity come up for employment through a company for an unrelated occupation. If that happens, I will turn in my Childcare license. I have several children in my care, I would have all but one find other arrangements and keep one as that child is family. During the day, we would still do activities, just with the freedom to leave the house! I plan to claim the income on my taxes, would I still be able to claim expenses? Including use of the home?

If you are exempt from your state's child care licensing rules, you can deduct the same expenses as a licensed provider. If you are in violation of the rules, you can claim the same expenses, except for those associated with your home (property tax, rent, mortgage interest, utilities, house insurance, house repairs and house depreciation).

[Unregistered]

Thanks for the reply Tom, we have officially decided to have me close the licensed daycare and provide care for just family (legally unlicensed in my state). I have another question regarding all my purchased so far. I've only been open since the beginning of the year, some of my purchases so far I have classified as 100% business as that's what they were at the time, now that I am closing, I'll be selling some and keeping others but using outside daycare hours. Would it just be easiest to go back and claim time space on them all or how should I handle this?

[TomCopeland]

Thanks for the reply Tom, we have officially decided to have me close the licensed daycare and provide care for just family (legally unlicensed in my state). I have another question regarding all my purchased so far. I've only been open since the beginning of the year, some of my purchases so far I have classified as 100% business as that's what they were at the time, now that I am closing, I'll be selling some and keeping others but using outside daycare hours. Would it just be easiest to go back and claim time space on them all or how should I handle this?

Tricky question. If you deduct something as 100% business and then sell it, you will have to report the amount you received in the sale as income. If you used the time-space %, then you have to determine if you have a gain (in which case you must report the income) or a loss (in which case you can deduct the loss). I explain this in great detail in my annual Family Child Care Tax Workbook and Organizer. If it's only a few items, you may just want to ignore the tax consequences.

[Unregistered]

Thanks for the info! I'll pull out my copy of the book and read up a little more.