As with any other business, daycares are eligible for certain tax deductions. With tax write-off, you can reduce their taxable income. The IRS is responsible for calculating and cataloging deductions. However, you must be aware of all possible write-offs for daycares. Read on to learn more about tax write-offs for daycare providers.
8 Important Tax-Write Offs for Daycares
Daycare providers can save a lot of money by taking advantage of tax deductions. This is why keeping track of Daycare Receipts is crucial for budgeting. Here are the top eight expenses that are eligible for tax write-offs.
1. Employee Salaries
Do you hire employees to take care of the kids? If your business grows and you hire more people to watch the kids, you may be eligible for a tax deduction on the wages you pay them. However, as a business owner, you can't factor in your own pay.
2. Necessary Materials & Utilities
Having a daycare means paying for electricity and water. The good news is that you can include these expenses in tax write-offs for daycares. The cost of materials necessary for daycare operations can also be written off. It includes diapers, wipes, bottles, formula, cleaning supplies, and anything else you use to run your business. Use an Infant Supply List Form to keep a record of such necessities. Postage, paper, ink, and other office supplies are also included.
3. Loan Interest & Bank charges
If you start the company with a loan, the interest paid on loan is also eligible for a tax write-off. Plus, if your daycare uses a separate bank account to handle commercial transactions, such as receiving client payments and making internal deposits, bank fees for this type of account tend to accumulate over a year. All of these expenses can be written off on your taxes.
4. Industry Membership Dues
In this context, "professional affiliations" means membership in any industry-specific organization, such as Standout Daycare. Standout Daycare provides training, coaching, and networking opportunities that help you enhance your daycare business. Any related expenses can be written off.
5. Insurance Coverage
There are insurance requirements unique to the daycare business. The daycare industry is thriving. Therefore, several insurance providers have begun offering "daycare insurance." When calculating your tax refund, you can deduct the amount you paid for insurance.
6. Education & Training
Knowledge of current trends in child care is essential. You can write off the cost of tuition, fees, and books if you take a course or workshop or compensate an employee for doing so. However, keep in mind that all training must be directly applicable to the company's needs.
7. Marketing Funds
What methods do you use to attract more parents to your daycare? If you run a childcare business, you can write off any money you spend on marketing to bring in new customers. It includes all expenses incurred on newspaper ads, social media marketing, television or radio advertisement, etc.
8. Fixtures and Equipment
The purchase of daycare-specific furniture or equipment may be tax deductible, but depending on its size, it may also be considered a capital expense. A company incurs capital expenses when it invests in a revenue-generating asset that will also lose value over time. The depreciation will be included in subsequent tax filings.
Learn to Better Manage Your Daycare Finances with Standout Daycare
Expenses can be monitored more efficiently if they are coded and recorded soon after they are incurred. This helps maintain the books and reduces the odds of forgetting the expense. One easy way to track your income and expenses and prepare for the tax season is to use Daycare Income & Expense Worksheets.
Additionally, you should provide a Daycare End of Year Tax Statement to parents. You can use these forms as a daycare provider to claim your yearly income. On the other hand, parents can use them to file for tax deductions if it is applicable. Standout Daycare can provide advice and training to help you manage your finances in a better way. We also help daycares with grant applications. For more information, contact Standout Daycare today.
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