Every Tax Deduction for Home Daycare Providers

The IRS allows home daycare providers to deduct business expenses across 19 categories. Here's the complete list with real examples — so you never miss a deduction.

Three Types of Deductions

100% Business (10 categories)

Used exclusively for daycare — the full amount is deductible.

Time-Space % (8 categories)

Shared between home and daycare — deductible based on your Time-Space percentage.

Mileage (1 category)

Deducted at the IRS rate of $0.725 per mile for 2026.

100% Business Deductions

These expenses are used exclusively for your daycare. The full amount is deductible on your Schedule C.

Food & Meals

Groceries, snacks, milk, meals for the kids. You can also use the IRS standard meal rate instead of actual costs — it's often worth more.

Examples: Costco grocery run, Aldi snacks, milk and juice, breakfast supplies

Supplies

Diapers, wipes, art supplies, paper, crayons, glue, craft materials — anything the kids use up.

Examples: Crayons, construction paper, glue sticks, diapers, wipes, hand sanitizer

Toys & Equipment

Toys, books, games, small furniture, climbing structures, cribs. For big purchases, be specific in your description — your accountant may need to handle these differently at tax time.

Examples: Board games, picture books, play kitchen, outdoor climber, crib

Training & Education

CPR/First Aid certification, child development courses, conferences, workshops, CEU credits.

Examples: CPR class, first aid recertification, child development workshop, online CEU course

Marketing

Facebook ads, flyers, business cards, website hosting, online listings, yard signs.

Examples: Facebook ad, Vistaprint business cards, yard sign, website domain renewal

Licensing & Fees

State license renewal, local business license, background checks, fingerprinting, water testing, lead testing. These are required costs that are fully deductible.

Examples: DCFS license renewal, fingerprinting fee, background check, water test kit

Professional Services

Tax preparer, accountant, bookkeeper, legal consultation. If you pay someone to do your Schedule C, that fee is deductible as a business expense.

Examples: Tax preparation fee, accountant consultation, legal advice

Software & Subscriptions

DaycareProfit, Brightwheel, KidReports, curriculum subscriptions, accounting software — any tool you use for your daycare business.

Examples: DaycareProfit subscription, Brightwheel, curriculum app, QuickBooks

Bank & Processing Fees

Business bank account fees, Square/Stripe processing fees, Zelle Business fees.

Examples: Monthly bank fee, Square processing fee, Stripe fee on parent payment

Assistant / Helper

Wages paid to your assistant or helper. Used exclusively for your daycare, so the full amount is deductible.

Examples: Part-time helper wages, substitute caregiver pay

Time-Space % Deductions

These are shared between personal and business use. Your accountant applies your Time-Space percentage to determine how much is deductible. You log the full amount — the math happens at tax time.

Rent / Mortgage Interest

Renters: a portion of your rent. Homeowners: a portion of your mortgage interest (not principal). One of your biggest deductions.

Examples: Monthly rent payment, mortgage interest portion

Property Tax

Homeowners only. A portion of your property tax is deductible for your daycare.

Examples: Annual property tax payment, semi-annual tax installment

Utilities

Electric, gas, water, trash pickup. Kids mean more laundry, more heat, more everything — and a portion is deductible.

Examples: ComEd electric bill, Peoples Gas bill, water bill, trash service

Phone & Internet

Your cell phone for parent texts and calls, home internet for CACFP records and business use.

Examples: Monthly cell phone bill, home internet service, business phone line

Insurance

Homeowner's or renter's insurance, liability insurance. The business portion is deductible.

Examples: Renter's insurance, homeowner's insurance, daycare liability policy

Repairs & Maintenance

Plumber, electrician, painting, new faucet, furnace repair — anything that fixes or maintains your home. For big jobs, be specific in your description — your accountant may need to handle these differently.

Examples: Plumber visit, furnace repair, interior painting, broken faucet replacement

Lawn & Outdoor

Lawn care, snow removal, outdoor play area maintenance, landscaping. For big installations (fencing, playground builds), be specific — your accountant may need to handle these differently.

Examples: Lawn mowing service, snow removal, playground mulch, fence repair

Cleaning

Cleaning supplies, cleaning service, paper towels, hand soap, trash bags, disinfectant.

Examples: Cleaning service, Lysol, paper towels, trash bags, mop replacement

Mileage Deduction

Transportation (Mileage)

Every mile you drive for daycare — grocery runs, supply store trips, field trips, training classes, bank deposits. The IRS rate is $0.725/mile for 2026, which is almost always worth more than tracking gas receipts. Just log your miles and trip purpose.

Examples: Costco supply run (12 miles), training class (8 miles), bank deposit (3 miles), field trip (15 miles)

What About Receipts?

$75 and over: Strongly recommended. The IRS expects backup proof for expenses this size. Snap a photo when you make the purchase.

Under $75: Your expense log is solid documentation on its own, but uploading a receipt is always extra protection. The more proof you have, the stronger your deductions.

Learn more about organizing your receipts in our receipt organizer guide.

Deductions Most Daycare Owners Miss

Licensing and background check fees

Your state license renewal, fingerprinting, background checks, water testing — these are required business costs and 100% deductible. Many providers forget to track them because they only happen once or twice a year.

Professional services

The fee you pay your accountant or tax preparer to file your Schedule C? That's a deductible business expense. So is any legal consultation related to your daycare.

Bank and payment processing fees

If you use Square, Stripe, or any payment processor for parent payments, those fees are deductible. Same for your business bank account monthly fee.

Snow removal and lawn care

Shoveling, salting, lawn mowing — if parents and kids use your outdoor areas, the upkeep is a deductible expense (at your Time-Space %).

Short mileage trips

A quick run to the store for milk seems too small to track, but at $0.725/mile, a 6-mile round trip is a $4.35 deduction. Do that twice a week and it's over $450/year.

Frequently Asked Questions

How many deduction categories does the IRS allow for home daycare?

There are 19 standard expense categories that home daycare providers can use on their Schedule C: 10 that are 100% business deductions, 8 that use your Time-Space percentage, and 1 for mileage.

Do I need to calculate my own deductions?

Your job is to track every expense accurately. Your accountant handles the final calculations — especially applying the Time-Space percentage to shared expenses. The better your records, the more deductions your accountant can claim for you.

Can I deduct expenses from before I was licensed?

Generally, you can deduct start-up costs incurred before you opened your daycare, up to certain limits. Consult your accountant about which pre-opening expenses qualify.

What if I use the standard meal rate instead of actual food costs?

The IRS allows you to use a standard meal and snack rate instead of tracking actual food receipts. For many providers, the standard rate results in a higher deduction. Your accountant can help you determine which method saves you more.

Track all 19 categories automatically

DaycareProfit categorizes every expense into the right deduction type and builds a tax-ready report for your accountant. No spreadsheets, no manual sorting.