Deductions Totaling $3,337.85

[katebethke]

I just finished my record keeping for the short time I was in operation as a child care provider (opened doors Sept 28th) and my total deductions are upwards of $3,000! We finished out the basement and added a playroom and a nap room so the kids would have a place to play/sleep so those were the big expenses but I just feel like my deductions are a little too high for the short time I was in service.. I have a receipt to back up every purchase made but wondering if i'm missing something. Listed below is a breakdown of my calculations. If anyone sees any red flags with this, please advise! happyface

UTILITIES DEDUCTION-$550.96(gas, electric, trash, etc.)
HOUSE DEDUCTION-$67.34 (home insurance)
MAINTENANCE DEDUCTION- $988.89 (playroom/nap room)
BUSINESS EXPENSE DEDUCTION-$1,445.39(supplies)
MILEAGE DEDUCTION -$285.26(based on .535 a mile)
MEAL DEDUCTION-$387.02(standard meal plan)
GRAND TOTAL DEDUCTIONS-$3,337.85

[Josiegirl]

No red flags to me, especially if you're just starting out. There are always tons of start-up fees and costs making things child-care ready. But I'm sure Tom will know for sure.
Just wanted to add that for me, many of my first years doing child care, I ended up with 0 income due to deductions.

[TomCopeland]

Deductions

I just finished my record keeping for the short time I was in operation as a child care provider (opened doors Sept 28th) and my total deductions are upwards of $3,000! We finished out the basement and added a playroom and a nap room so the kids would have a place to play/sleep so those were the big expenses but I just feel like my deductions are a little too high for the short time I was in service.. I have a receipt to back up every purchase made but wondering if i'm missing something. Listed below is a breakdown of my calculations. If anyone sees any red flags with this, please advise! happyface

UTILITIES DEDUCTION-$550.96(gas, electric, trash, etc.)
HOUSE DEDUCTION-$67.34 (home insurance)
MAINTENANCE DEDUCTION- $988.89 (playroom/nap room)
BUSINESS EXPENSE DEDUCTION-$1,445.39(supplies)
MILEAGE DEDUCTION -$285.26(based on .535 a mile)
MEAL DEDUCTION-$387.02(standard meal plan)
GRAND TOTAL DEDUCTIONS-$3,337.85

All of these deductions meet the IRS definition of "ordinary and necessary" business expenses, so you are good. I assume that you are applying your time-space % to shared items such as utilities, insurance, maintenance, business expense above.

[katebethke]

Utilities and House deductions were calculated using my t/s%, as for business expenses and maintenance- I claimed 100% because they were bought and used solely for child care. ( toilet paper, paper towels, sippy cups, cleaning supplies, etc.) The only item I applied a business% to was the playset because my son also uses. I calculated that percentage by business use hours/personal use hours.

[daycarediva]

My first few years in business I made almost no 'profit', due to deductions..

Same with start up costs for my husbands commercial construction business.

Looks about right (maybe even on the low end)

[TomCopeland]

expenses

Utilities and House deductions were calculated using my t/s%, as for business expenses and maintenance- I claimed 100% because they were bought and used solely for child care. ( toilet paper, paper towels, sippy cups, cleaning supplies, etc.) The only item I applied a business% to was the playset because my son also uses. I calculated that percentage by business use hours/personal use hours.

In order to claim 100% of toilet paper and paper towels, you would have to be able to prove that your family never used the same bathroom, unless you changed the toilet paper rolls each time! So, if you have a bathroom exclusively used by your daycare kids, okay. Otherwise, use your time-space%. In any case, keep copies of receipts for all toilet paper, paper towels, etc. so you can show that you spent money on these items that were used personally.

[Mom2Two]

Maybe I'm missing something...but I'm not seeing your home office deduction. That is usually a pretty big deduction. Also home depreciation.

[Tigerlilly]

I was told I could not claim any deductions unless I could deduct $24,000 or more and I just do not see myself ever spending $24,000 a year on my daycare. Maybe I was told wrong?

[TomCopeland]

deductions

I was told I could not claim any deductions unless I could deduct $24,000 or more and I just do not see myself ever spending $24,000 a year on my daycare. Maybe I was told wrong?

Wrong. What you are referring to is the question of whether to itemize on Schedule A or take the standard deduction of $24,000 for married couples. This has nothing to do with claiming deductions for your business. You can still deduct all your business expenses and take the $24,000 standard deduction.

[daycarediva]

In order to claim 100% of toilet paper and paper towels, you would have to be able to prove that your family never used the same bathroom, unless you changed the toilet paper rolls each time! So, if you have a bathroom exclusively used by your daycare kids, okay. Otherwise, use your time-space%. In any case, keep copies of receipts for all toilet paper, paper towels, etc. so you can show that you spent money on these items that were used personally.

I actually do this- my daycare bathroom is exclusive use M-F but on Saturday and Sunday my kids/their friends use it. Every Friday I clean it top to bottom, put a new TP and paper towel roll in there and on Monday morning I switch them out.

[Country Kids]

I actually do this- my daycare bathroom is exclusive use M-F but on Saturday and Sunday my kids/their friends use it. Every Friday I clean it top to bottom, put a new TP and paper towel roll in there and on Monday morning I switch them out.

How would you prove this though if audited? I always wonder how the % use can be proved on these types of things.

[hwichlaz]

How would you prove this though if audited? I always wonder how the % use can be proved on these types of things.

If you buy it on separate receipts they kinda have to take your word on it don't they? I mean ANYTHING I buy for daycare they could try to argue some friend's kid might visit and touch for a few minutes. There is no way to PROVE that they did or didn't.

[TomCopeland]

receipts

If you buy it on separate receipts they kinda have to take your word on it don't they? I mean ANYTHING I buy for daycare they could try to argue some friend's kid might visit and touch for a few minutes. There is no way to PROVE that they did or didn't.

Keeping personal and business receipts for supplies, etc is the way to protect yourself in an audit.

[Quiet Time]

Deductions

Maybe I'm doing this wrong, but I apply a TS% to almost everything I buy (except food and clothing). I have four kids of my own, but since 100% of my house is used for daycare, almost everything can be used by daycare. The ipod we gave to my son for Christmas plays music and white noise while the DCK nap, the bookshelf in my daughter's room I recently bought holds some DCK's books, etc...

I typically have less than $200 in items that are 100% day care expenses because my own kids could use almost anything I buy for DC.

I apply a TS% to almost everything and my supplies are typically around $8,000 and I'm only open 200 days a year.

So your total deductions seem a little low to me...or am I doing this all wrong?

[TomCopeland]

expenses

Maybe I'm doing this wrong, but I apply a TS% to almost everything I buy (except food and clothing). I have four kids of my own, but since 100% of my house is used for daycare, almost everything can be used by daycare. The ipod we gave to my son for Christmas plays music and white noise while the DCK nap, the bookshelf in my daughter's room I recently bought holds some DCK's books, etc...

I typically have less than $200 in items that are 100% day care expenses because my own kids could use almost anything I buy for DC.

I apply a TS% to almost everything and my supplies are typically around $8,000 and I'm only open 200 days a year.

So your total deductions seem a little low to me...or am I doing this all wrong?

You are not doing anything wrong. What other providers deduct should not be used as a guide to what you can deduct. When you buy something that is used by both your business and your family, use your time-space% and you'll be fine.