First off, I strongly recommend reading Tom Copeland’s books, especially the Family Child Care Record-Keeping Guide
To help you prepare your information for your tax return AND to thoroughly understand your daycare tax return (either if you do your tax return yourself or hire a tax professional to prepare the tax return), the Tax Workbook & Organizer book is fantastic. If you don’t necessarily want to know the fine details about the tax return but want to ensure your tax professional has all of the proper information they need, the Tax Companion is ideal. Both are annual books that are well worth the money to ensure your tax return is accurate.
Here are a few basic things to keep track of:
- Income, including any from the food program.
- Number of breakfasts, lunches, dinners, and snacks served to daycare children. Include any “extra” ones that you cannot count for the food program. You may be paid for your own children by the food program; however these payments are not counted as income and the meals cannot be deducted for tax purposes.
- Amount of time spent at home for daycare. This means the time from when the first child arrives, to when the last child leaves. Also add in time before and after this period that you are doing work for daycare, such as preparing activities, cleaning, record-keeping and interviews. I recommend keeping exact records of your time each day.
- Space Percentage. Square feet of your house separated into three categories: Space used ONLY for daycare, Space used PARTLY for daycare, and Space NOT used for daycare. Include your garage space.
- Amount spent for daycare licenses and training. Keep receipts!
- Amount spent for items that are used 100% for daycare. Keep items over $200 separately. Keep all receipts!
- Amount spent for items that are used partly for daycare. Keep items over $200 separately. Keep all receipts!
- Amount spent for repair and maintenance to your home. Keep receipts!
- Amount spent for improvements to your home. Keep receipts!
- Cost of all utilities, mortgage interest (or rent), property tax, and insurances.
- Miles driven for daycare. Include miles driven when shopping primarily for daycare purchases and whenever a daycare child is in the vehicle. Keep a mileage log for every trip.
- Start-Up Inventory. When you start daycare, you should inventory everything in all of the rooms that children will be in. This includes furniture, pictures, appliances, toys, electronics, etc. Include the item description, the fair market value, and what percentage it will be used for business.
As I mentioned above, the The Redleaf Calendar-Keeper 2022, KidKare software , the Tax Workbook & Organizer, or the Tax Companion are ideal tools. I also have some spreadsheets that may be helpful for you on my “Worksheets” page that you may find useful.
(In full disclosure, I do get a small commission if you purchase through some of the Amazon links, but that is not why I am recommending them).