Family Day Care Providers Meals Allowance and Other Amenities for their Business.
A taxpayer who is in the business of providing family day care in their home most likely provide meals and other amenities. Daycare providers may deduct the ordinary and necessary expenses of their business. In both parts of this blog series, we will address each of the two primary the cost of providing meals and snacks to children in their care. First of all, we wrote about tax deductions that include the business use of a daycare providers home. Likewise, in this blog we will give a rundown on Day Care Providers Meals Allowance and other special tax benefits day care providers enjoy now.
Business Use of the Home
In our last blog, we talked about the prorated use of the home tax deduction, the Daycare Facility Exception and what the specifics are when you use your home as a daycare facility. Also, we addressed the day care provider who owns a home versus rents their home space and how exactly the space is used for business. Similarly, in this blog, we will discuss Day Care Providers Meals Allowance, the Meal Rates, and other tax deduction goodies the IRS has in store for you.
Day Care Providers Meals Allowance
Family day care providers may deduct the cost of meals given to the children in their care. In contrast, separating the cost of food between day care use versus for personal use can be a record-keeping nightmare. We suggest you keep separate receipts to ease the burden. Let’s move on and look at the Day Care Providers Meal Allowance and rates.
Standard Meal and Snack Rates for Day Care Providers
To minimize disputes with family care providers about the amount of their meal deduction and the quality of their substantiation, IRS has made a change. The IRS will allow the daycare providers to use standard meal and snack rates to compute the deductible cost of food instead of deducting actual costs. You may simplify recordkeeping by using standard rates instead of itemizing the expense. The simplified deduction for each meal and snack bought and served to an eligible child during day care is equal to the US Department of Agriculture’s Tier I Child and Adult Food Care Program’s (CAFCP’s) reimbursement rates for meals and snacks served in day care homes.
Annual adjustments are made for the rates; as a result, the rates for 2018 are:
The rates do not include the cost of nonfood supplies (e.g., utensils, paper napkins and paper towels), which are a separate deduction. The number of meals, per day, per child, is limited to a maximum of one breakfast, one lunch, one dinner and three snacks. The following is an example of the daily maximum allowance in the contiguous states (the maximum for Alaska and Hawaii will be higher).
Meal Deduction
Meal Reimbursement or Subsidy
When the daycare provider receives some form of reimbursement or subsidy, they can deduct only the part of the simplified rate that exceeds the reimbursed amount.
Unemancipated Children
The rates may be used only by taxpayers (whether or not they are licensed, registered or otherwise regulated) providing care in their homes to unemancipated children, and only with respect to children for whom they are paid to care and who don’t reside in the home.
Switching from Simplified to Substantiated Rates Year Over Year
Family childcare providers who use the simplified rates must use them to deduct meals and snacks for the entire tax year; and, the providers can switch to deducting actual substantiated amounts in another tax year. Family day care providers using the standard rates must keep records substantiating their computation of the total deductible amount. The records should include the name of each eligible child, the dates and hours of their attendance in the family day care and the type and quantity of meals and snacks served. A number of commercially available software programs can maintain the required records.
Other Daycare Deductions
Other deductions, with adequately proof, can include:
- Toys and games
- Computer and software
- Toilet supplies and diapers
- Auto expenses for travel for field trips and business
- Licenses and permits
- Recordkeeping supplies
- Wages paid to helpers
- Other related expenses
Any Day Care Deduction Questions?
As you can see, the Day Care Providers Meals Allowance is an interesting subject; and, the record-keeping and tax side of providing family day care can be daunting. Do you have questions regarding recordkeeping and tax-filing issues for your day care? Call Alex Franch, BS EA at 781.849.7200 or email the office at contactus@worthtax.com to secure help with your small business accounting needs. You can also book an appointment online here and you can meet with any of our tax experts.
Alex Franch, BS EA
Alex is a Tax Specialist and Partner at Joseph Cahill & Associates / WorthTax. He has a diverse background including a Bachelor of Science from Boston College in Mathematics and extensive military service. Alex is an Enrolled Agent and has a decade of tax preparation experience. He is passionate about serving businesses with tax and financial planning strategies.
Mr. Franch is licensed by the Financial Industry Regulatory Authority (FINRA). He holds a Series 6, 63, 65, and 7, and by the Commonwealth of Massachusetts Division of Insurance.
Alex Franch is a registered representative of, and offers securities and investment advisory services through, Commonwealth Financial Network. He is a registered broker-dealer, Member FINRA/SIPC.
Sources and Resources for Day Care Providers and Other Small Business Owners
- Day Care Providers Business Home Use
- After Tax Reform, What’s Best for Business Owners: S Corp or C Corp?
- Proposed New IRS Tax Form 1040 Breakdown
- Avoid Most Common Accounting Mistakes Small Business Owners Make
- Home Office Tax Deduction Good or Bad?
- Employee Business Expenses: Tax Reform Suspends Tax Deduction
- Preparing Taxes for 2018 and Beyond
- What Makes a Great CEO?
- Cryptocurrencies and Taxes
- New Tax Law Severely Limits Entertainment Deductions
- 9 Best Ways to Start a Business Budget to Spur and Guide Growth
- How Small Businesses Write Off Equipment Purchases
- 2018 Mileage Rates for Businesses
- IRS Accountable Plans Tax Map
