Creative Ways to Utilize Business Deductions

Keep in mind that in order to deduct 100% of the cost of an item, it has to be directly related to the operation of your home daycare. In order to claim an indirect expense and use your business percent, the item must be in some way utilized by your home daycare business. I wanted to pass along some creative ways to take advantage of these business deductions.

Remember, the more expenses you can document, the lower your tax bill becomes!

ADVERTISING: You may claim advertising as an expense when you have a child care opening which you are trying to fill. You could do this by placing an advertisement in the local newspaper and recording 100% of the cost of this ad as a business expense. Remember when you mail your payment for this expense to record the cost of postage as a business expense too.

You could design a poster to advertise your opening and make photocopies to hang in the library. The cost of the supplies used to make this advertisement and the cost of the copies are 100% deductible.

If you place an ad on the local radio station to promote your daycare, its cost would be 100% deductible.

BANK FEES: If you hold a separate checking account used exclusively for your daycare business, any bank fees or service charges can be deducted as a 100% business expense. You can also deduct the fee for your purchase of daycare checks as well as the cost to purchase an endorsement stamp for depositing your checks.

INSURANCE: The insurance you purchase specifically to cover your daycare business is 100% deductible. The insurance premium you pay on your entire home and its contents is a business percent deduction. If you choose the Actual Expense Method of claiming your automobile expenses, instead of the IRS Adjusted Mileage Allowance, you can deduct a portion of your automobile insurance as well.

POSTAGE: All postage used to mail information to daycare parents is 100% deductible. You can also claim the postage used for business correspondence including tax forms sent to the state or to the IRS.

REPAIRS: The cost to repair any damage done to your home, inside or outside, which was caused by a daycare child or parent of a child in your care is a 100% deduction. If a daycare child throws a stone through your living room window, the cost to repair or replace it is 100% deductible.

Any repairs made to your appliances can also be used to reduce your taxes. The cost to repair your broken stove or refrigerator can be a business percent deduction as long as you use it regularly in the operation of your daycare.

The bottom line when claiming business deductions is to be honest. Ask yourself, "does this really relate to the operation of my daycare?" If so, take advantage of the expense. Be creative, but have the proof to back up your claim!

Brigitte A. Thompson (WAHM of Sarah 1/93 and Jacob 4/97)

(c) 1999 Brigitte A. Thompson
No information may be reproduced without written permission from the author. This information is based on current tax laws which are subject to change. Every effort has been made to ensure this information is as accurate and complete as possible; however, the author assumes no liability for any errors, mistakes, or omissions.

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About the Author:
All articles ©Copyright 1999 Brigitte A. Thompson Brigitte is the President of DATAMASTER, LLC and has been providing accounting, bookkeeping, income tax and payroll services since 1992. She has also operated a home daycare for years and has written a book for providers :
The Home Daycare Complete Record-keeping System