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Babysitting Deductions

Forum|Forum|7 years ago
January 7, 2019
2 replies
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My wife babysits in our house. Some one said since our house is the daycare we can use a percentage of the area as a deduction? Can anybody tell how this works? What percentage? Of what, mortgage?

Thank you.

Best answer by BarbL

The IRS has special rules for a home-based daycare providers. The space does NOT need to be used exclusively for daycare; this is a requirement for home offices, but not daycare. If the daycare space in your home is used 40% of the time for daycare and 60% for personal use, you will be able to take 40% of the costs for that specific area as a business expense. Costs include utilities, insurance, mortgage interest, property taxes, etc., and you will prorate them based on the area used for daycare.

For example, if your home is 2,000 square feet and you use 1,000 feet for your daycare, your starting point will be 50% of your utilities, insurance, mortgage interest, etc. Once that 50% amount is calculated, reduce it again by the percentage of time those areas are used for personal purposes. (Alternately, you can choose a simplified calculation based on a flat rate per square foot.)

TurboTax will walk you through this process and do the calculations for you. The program will ask about specific expenses that may be includable in the Business Use of Your Home deduction. Be sure to indicate that you have a Day Care, so the special rules will apply.

More information can be found in this IRS publication: Business Use of Home

Carl11_2

Employee

First, understand that the TurboTax program is not complete yet. It won't be complete until after the IRS releases the electronic version of forms necessary to complete it. Some of those forms are *required* for you to correctly and completely report your daycare business. We don't know when this will happen, because there is no way of knowing how long the govt shutdown will last.

But basically, you will work it through the business Income & Expenses (SCH C) section of the program and just read the screens as you work it through. Then make the necessary selections and enter the data the program asks for. As it stands now, your questions are just way to general to provide you any response that would be useful to your specific situation, without writing a book to cover all the possibilities. As you work it through the program I'm sure you'll have questions, and they will be more specific to your situation, providing a better chance of getting a useful and meaningful response.

N

NCPERSON1

to deduct, it has to be a area of the home that is used for Day care and NOTHING ELSE. So if day care area by day, but you watch TV in that room in the evening, there is nothing to deduct.

BarbLAnswer

Employee

The IRS has special rules for a home-based daycare providers. The space does NOT need to be used exclusively for daycare; this is a requirement for home offices, but not daycare. If the daycare space in your home is used 40% of the time for daycare and 60% for personal use, you will be able to take 40% of the costs for that specific area as a business expense. Costs include utilities, insurance, mortgage interest, property taxes, etc., and you will prorate them based on the area used for daycare.

For example, if your home is 2,000 square feet and you use 1,000 feet for your daycare, your starting point will be 50% of your utilities, insurance, mortgage interest, etc. Once that 50% amount is calculated, reduce it again by the percentage of time those areas are used for personal purposes. (Alternately, you can choose a simplified calculation based on a flat rate per square foot.)

TurboTax will walk you through this process and do the calculations for you. The program will ask about specific expenses that may be includable in the Business Use of Your Home deduction. Be sure to indicate that you have a Day Care, so the special rules will apply.

More information can be found in this IRS publication: Business Use of Home

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