Meet Renee, a passionate home-based daycare provider who spends her days nurturing toddlers, organizing crafts, and juggling snack time schedules. Like thousands of childcare professionals across the U.S., Renee wears many hats—but when tax season rolls around, she faces a unique set of financial challenges. The good news? The IRS recognizes the vital work of childcare providers and offers a range of tax benefits designed to ease the burden.
If you operate a daycare—whether in your home or a separate facility—this guide will walk you through the most valuable tax deductions available, from the business use of your home to vehicle mileage and meal reimbursements. Let’s dive in and help you, like Renee, keep more of your hard-earned income.
1. Get Your Taxpayer ID Right: Use an EIN, Not Your SSN
Every childcare provider must report income to the IRS, and that starts with the right Taxpayer Identification Number (TIN). While you can use your Social Security Number, it’s safer and more professional to apply for an Employer Identification Number (EIN).
Why it matters: Parents need your TIN to claim the Child and Dependent Care Credit. If you don’t provide it, you could face IRS penalties. An EIN shields your personal identity while maintaining compliance.
Quick Tip: Apply for an EIN online for free at irs.gov.
2. Claim the Business Use of Home Deduction (Even If It’s Not Exclusive)
Unlike most home-based businesses, daycare providers can deduct part of their housing costs—even if the space isn’t used exclusively for business.
To qualify, you must:
- Be in the business of daycare (not just babysitting casually).
- Be licensed or exempt under state law.
- Use your home space regularly for daycare activities.
You have two deduction methods:
Simplified Method
- Deduct $5 per square foot, up to 300 square feet (max $1,500).
- Less paperwork, but typically results in a smaller deduction.
Regular Method
- Calculate based on the actual percentage of home used and time used for daycare.
- Includes portions of rent/mortgage, utilities, and even repairs.
Example: Renee uses her 1,600 sq. ft. basement for daycare 12 hours a day, five days a week. After calculating the time-space percentage, she deducts over $2,800 for the year. That’s a big win for her bottom line.
3. Don’t Forget Meal and Snack Deductions
Feeding little ones isn’t just an act of love—it’s a business expense! The IRS allows deductions for meals served to children under your care.
You can choose:
- Actual Cost Method: Requires detailed receipts and logs.
- Standard Meal Rates: Simpler and based on IRS-approved reimbursement rates.
Here’s the official IRS Simplified Meal Deduction Table for family daycare providers:
| Year | Location | Breakfast | Lunch/Dinner | Snack |
| 2024 | Contiguous U.S. | $1.65 | $3.12 | $0.93 |
| Alaska | $2.63 | $5.05 | $1.50 | |
| Hawaii, Guam, PR, VI | $2.12 | $4.05 | $1.20 | |
| 2025 | Contiguous U.S. | $1.66 | $3.15 | $0.93 |
| Alaska | $2.66 | $5.10 | $1.52 | |
| Hawaii, Guam, PR, VI | $2.14 | $4.09 | $1.22 |
Note: These apply only to meals served to children in care, not your own household. No receipts required—just track the number of meals per day, per child.
4. Deduct That Car Mileage—Yes, Even for Grocery Runs
If you use your personal vehicle for daycare-related errands (think field trips, toy store runs, or supply pickups), you can deduct those miles.
Choose between:
- Standard Mileage Rate: 70¢ per mile for 2025.
- Actual Expense Method: Requires logs and receipts for gas, insurance, and maintenance.
Tip: Use a mileage tracking app or keep a logbook to back up your claims. Only business-related mileage counts!
5. Toys, Crafts, Field Trips, and Streaming—They Count Too
That trip to the children’s museum? Deductible. Finger paints, board games, napkins, and even Netflix (if used to entertain the kids)? All potentially deductible.
Here’s what you can write off:
- Toys, books, and educational games
- Field trip fees and transportation
- Disposable supplies (cups, plates, tissues)
- A portion of your internet and TV subscriptions
Be sure to prorate expenses if they’re used for both personal and business purposes.
6. Pay Self-Employment Taxes (and Take the Deduction Too)
Childcare providers are considered self-employed, which means you must pay:
- 12.4% Social Security
- 2.9% Medicare
But here’s the silver lining: You can deduct half of this from your income when calculating your taxes.
And if your net earnings exceed $200,000 (or $250,000 if married), you may also owe an additional 0.9% Medicare tax.
7. Plan for Retirement—And Get a Tax Break Now
Renee’s not just thinking about today’s toddlers; she’s planning for tomorrow’s comfort. Contributing to a retirement account lowers your taxable income while helping you build a nest egg.
Popular options for childcare providers:
- SEP IRA: Deduct up to 25% of net income.
- Solo 401(k): Higher contribution limits if you’re a solo owner.
- Traditional or Roth IRA: $7,000 limit ($8,000 if 50+); traditional contributions are deductible, Roth grows tax-free.
8. Other Deductions You Shouldn’t Miss
Here are a few more write-offs daycare pros often overlook:
- Advertising: Website, business cards, social media ads.
- Continuing Education: Seminars, courses, certifications.
- Insurance Premiums: Business liability and property insurance.
- Licensing Fees: Required to operate legally.
- Employee Wages: If you hire help, be sure to handle employment taxes properly.
Final Thoughts: Maximize Your Tax Benefits, Minimize Your Stress
Running a daycare is more than a job—it’s a mission. But when tax time comes around, it pays to operate like a savvy business owner. The IRS offers generous tax breaks for those willing to track, document, and claim what’s rightfully theirs.
If this feels overwhelming, don’t worry—you don’t have to go it alone. At JS Morlu, we specialize in helping home-based businesses like yours stay compliant, claim every deduction, and plan for long-term success.
📞 Ready for expert help? Schedule a free consultation and let us help you build a smarter tax strategy.
