Do you ever wish you could get more done in less time and have more time for you? Check out these productive solutions for daycare providers-taxes!

In-Home Daycare Taxes: How to Stay Organized

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Anyone who has been a daycare provider for more than a year knows that tax time can be stressful. To successfully manage your in-home daycare taxes, you need to have a system in place and keep on top of it throughout the year. This is one of my best productivity tips to share!

Sticky notes that say tax time!

I’ll teach you how to efficiently collect your receipts and bills, then create a regular schedule to log your income and expenses. 

This is my 27th year in home daycare. I’ve made a ton of mistakes and learned a lot of productivity hacks along the way.

Step 1: Organize Your Receipts

Paperwork can pile up around your ears. You need a short term and long-term plan to manage it all. If your receipts and bills are not all in one place, you won’t be able to find what you need when it’s time to start deducting.

So let’s set up an organizational system for receipts that will give you more success in the coming year. 

You won’t file every piece of paper as soon as you bring it into the house, so you need to have a place to collect everything until you can get to it. I call this our “plopping place.” 

Save a drawer or a shoebox or whatever works for you and have it in a convenient place. Make sure your plopping place is front and center in your home. It should be near where you keep your purse when you come in so you are compelled to properly plop all receipts in that spot.

Check out these must-haves for organizing your daycare taxes

When it’s time to do your taxes for in home daycare, you’ll also need your monthly bills and other tax forms. Have a specific drawer or box to set them in until you have a chance to file them. 

If you start out with a place for everything, everything will eventually get in its place. So set up your plopping place, then go clean out your wallet, purse, car, and junk pile and put all the receipts in the plopping place until you have time to log them.

Keep all the receipts you think you might need. You can always throw out the ones that aren’t needed for a tax deduction at a later time. Err on the side of caution. 

If you’re a seasoned provider, you’ll already know that if you use the standard deduction for car expenses and standard mileage, you won’t need gas receipts.

As far as food goes, you are supposed to keep food receipts for family food and eating out so you can prove you didn’t eat all the food you’re trying to deduct as an expense for feeding the kids. Keep that in mind.

Step 2: Set a Schedule to Log your In-Home Daycare Tax Deductions

Once you have a well-established place to collect receipts and get used to using it, you’ll need a plan for logging your expenses for your daycare taxes. 

I suggest you mark on your calendar the first of every month to take a few minutes to log your daycare receipts.

You can use a notebook with categories at the top, or make a spreadsheet on the computer. I like to use excel, so that’s what I do. I have a category at the top of the page for each deduction.

Here’s a daycare provider tax deduction checklist:

  • Advertising
  • Office expenses
  • 100% business supplies
  • Shared supplies
  • Employee wages
  • Bank fees and interest
  • Insurance 
  • Memberships and/or continuing education fees
  • Furniture and equipment
  • Household expenses
  • Yard expenses
  • Activity expenses
  • Toys
  • Meal expenses
  • Extra food (food for regular food program meals can use a standard meal deduction, but special meals such as party food or a special dinner you make for a family, etc. is a separate expense)

For more ideas on what to add to your home daycare tax deductions list, I suggest checking out Tom Copeland’s book Family Child Care Record Keeping Guide. Tom is the expert and I look to him for all things related to home daycare provider taxes.

Once you have decided what categories you need and have made your sheets, set a time to record all of your expenses at the end of every month. 

Be mindful of your shared expenses. Toilet paper, for example, is a shared expense and you can deduct the cost at your time-space percentage. But for me, having no young kids of my own at home, if I buy crayons, they are obviously a 100% business expense. If you have kids at home, they would be a shared expense. 

If I buy a swing set, obviously it’s for the business only since my daughter is an adult.

Divide the receipts up and record the items on 100% business and shared expense categories for your daycare provider taxes. Then later when you total the shared expenses and figure your time/space percentage, you can just divide it out to have the total of what to deduct.

Don’t put too much time into dividing everything up right now. Just make sure you have a plopping place and that you have a regular schedule for dealing with what’s in it. If you wait too long, you’ll forget most of the expenses.

Believe me, I’ve used the “tally it all in January” method many years and I always regret it. I see Tom Copeland saying, don’t do that, and wish I hadn’t.

Tax paperwork, calculator and laptop with a person filling out forms.

Step 3: Additional Daycare Business Expenses

Now that you have all of your paper receipts managed, don’t forget to check your bank statements and online orders. Obviously, Amazon could be a big one, but what about a new mirror you got from Wayfair for the living room, or a big order you put in with Lakeshore?

Get those totals from your bank statements, Amazon, online receipts from the Walmart grocery pick up line, whatever you have. Check your check register too. Anywhere that could jog your memory. 

Don’t forget housekeeping, lawn services, major remodeling projects, and home repairs are partially deductible too. Check out Tom’s advice on how to record that. 

You could put a small notebook in your plopping place and add in notes when you have expenses without paper receipts. This will help you know where to look for those expenses. 

Step 4: Reporting Daycare Income

Once all of your expenses are recorded, it’s on to income for your in home daycare taxes. You should have food program receipts or deposits on your bank statements. And you should have been recording parent payments as they come in. 

I use the Tom Copeland calendar keeper. I cut the pages out of it so I can have my calendar to plan for the month, and the opposite page is the sign in and out forms. Then, I record payments right on that so I have everyone’s time and payments together at the end of the year.

Make a paper sheet or spreadsheet for those as well and add up the totals for your yearly income. Then, if you’d like, you can make receipts for each family that they can use to prepare their taxes with the total they paid to you.

Step 5: Preparing Your Daycare Provider Taxes

I use the Family Childcare Tax Workbook each year to prepare my taxes. If you hire a tax preparer, just make sure all of the above info is in the information you give them.

You’ll also need house payment information such as premiums, interest, and insurance, rent receipts, all utility bills including cable, Netflix, cell phone, etc. You can record these payments on a sheet and total them up as well.

Now you’re prepared for tax time. Your totals are ready and you’ll be able to just wait for all the remaining forms to arrive in the mail. Doesn’t it feel good to be ready? And you’re going to need an EIN number for your home daycare business taxes.

Start Organizing your Daycare Business Taxes NOW

Depending on what time of year it is when you are reading this, you might have to deal with 6 months or more of mess to clean up and get on track with your receipts. That’s okay! 

Don’t look at it with dread. Set a timer for 15 minutes and see how much you can get done. You can even set a reminder on your phone at a certain convenient time every day so you don’t get off track

Wherever you’re at in your home daycare taxes, just take small bites. Commit to doing 15 minutes a day and you’ll be surprised how fast you get it done.

What if you didn’t make a plopping place and your things are all over the house, car and planet? That’s okay too. Now you just have to see what you can do to gather it up. If you have most of it in a few places, commit to scheduling 15 minutes a day cleaning those places up and gathering it all in a box to do the steps above.

There’s no shame in not being organized. You are taking the first step towards better decisions and more organization right now! The more organized you learn to be, the less overwhelming things are. You got this!

Don’t forget to check out the rest of my series on how to run a home daycare and increasing your productivity: 

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Productivity tips for daycare providers: in home daycare taxes.

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18 Comments

  1. I love all your articles, you are like Super Woman to me! How do you do it all??? Would love the book, I’m struggling trying to learn about payroll taxes, etc..

    1. Thank you so much! I just try to keep things simple and be organized so I don’t waste a lot of time. The book would be great for that. Thanks for checking it out. You’re entered to win!

    1. I can totally understand that. There are lots of articles on the blog that should be helpful for you. I hope you find a lot of what you need here. You’re entered in the drawing!