Deductions by trade
What a home daycare can deduct.
For family child care providers running a daycare out of their own home — licensed, registered, or exempt from licensing under state law. Usually filed on Schedule C, with Form 8829 for the house.
Tax year 2026
Start here
Your home is the deduction, and daycare does not need a room of its own.
Most businesses must use a space regularly and exclusively before claiming a home-office deduction. Family daycare is a statutory exception: a room your family also uses may qualify if it is used regularly for daycare and you have applied for, hold, or are exempt from a state license. The deduction percentage depends on both the portion of the home used and the hours it is used during the year. Providers often understate the time factor by counting only the hours when children are physically present.
Cleaning, prep, records and shopping counted too. Every point applies to rent, utilities and insurance. Illustrative.
The time-space percentage
One number drives the whole home deduction: your space percentage multiplied by your time percentage. It is worth an afternoon getting right.
- Square footage used regularly for daycare, and the total square footage of the homeA room counts if daycare uses it regularly, even when the family uses it too. Exclusive use is not required here — that is the exception written into the law.Tax tip. Walk the house room by room before you settle on a number. Bathrooms, the hallway, the laundry room and storage are used by the daycare and are routinely left out — and each one raises the percentage applied to everything else.
- Hours the home was used for daycare, out of the 8,760 hours in the yearOpen to close for every day you operated, from the first child's arrival to the last child's departure.
- Hours worked with no children in the houseCleaning up after closing, preparing activities and meals, record keeping, calls to parents, shopping for the daycare, training done at home. These count, and they are the most commonly missed number on the return. The test is simple: would you be doing this if you were not running a daycare?Tax tip. Two months of honest records, extrapolated across the year, routinely move the time percentage by several points — and every point applies to rent, utilities, insurance and the whole house. No record on this page pays as well per minute spent.
- A calendar or an app recording those hoursDetail is what makes them hold up — date, time, and what you were actually doing. "Worked in the evening" is not a record; "7.30–9.00 pm, prepared activity materials and cleaned the play area" is.
- A room used only for daycare and never by the familyDeducted at 100 percent of its area rather than through the time percentage. Worth separating out if you have one.
What the percentage applies to
- Rent, or mortgage interest and property tax
- Home insurance, electricity, gas, water and heating oil
- Trash collection, internet and the alarm system
- Repairs and maintenanceA whole-house repair is deducted at your percentage. A repair only to the daycare space can be deducted in full.
- Depreciation of the home, if you own itWorked out on the building without the land, at your percentage, spread across 39 years. It needs either a valuation or purchase papers that split house from lot.Tax tip. Skipping it protects nothing: when the house sells, the gain is figured as though you had taken it every year. Not claiming it means paying for a deduction you never received.
- The simplified method at $5 a square footCapped at 300 square feet, and for daycare it must then be reduced by your time percentage. Simpler, and for most providers noticeably smaller than the real calculation.
Food
The second largest deduction, and the one you can claim without keeping a single grocery receipt.
- The standard meal and snack ratesThe Tier I rates changed during 2026. For meals served from 1 January through 30 June, use $1.70 for breakfast, $3.22 for lunch or supper and $0.96 for a snack. From 1 July, use $1.74, $3.31 and $0.98. Up to one breakfast, one lunch, one supper and three snacks a day may be counted for each child in care.Tax tip. The rates exist precisely so you never have to separate daycare groceries from your own. A one-line meal log each day is worth more than a year of saved receipts, and it takes a minute.
- A daily log of meals and snacks servedNoting what was served and to whom is enough: date, child, which meal. No amounts, no receipts.
- Food Program reimbursements are incomeMoney from your CACFP sponsor goes on the return as income — except the part reimbursing meals served to your own children, which is neither income nor deductible.
- Your own family's food never countsNor do meals served to your own children, whether or not they are sitting at the same table as the daycare children.
- Actual food costs instead of the ratesAllowed, but it means separating daycare groceries from family groceries receipt by receipt for the whole year. Almost nobody comes out ahead.
Supplies, toys and equipment
- Toys, books, craft materials, games and puzzles
- Cots, high chairs, safety gates, playpens and car seats
- Outdoor equipment — swing set, sandbox, playhouse, fencingOften used by your own family too. Deduct the business share, at your time-space percentage when it is shared.
- Cleaning supplies, paper towels, nappies, wipes and first aid
- Kitchen equipment, dishes, a chest freezer, a dishwasher
- Furniture and appliances used by the daycare and the family bothDeducted at the time-space percentage. A washing machine running daycare laundry and family laundry is a shared item, not a personal one.
- Computer, printer, tablet and daycare management software
The car
- The standard rate for 2026, with a log: 72.5 cents a mile to 30 June and 76 cents from 1 July
- The trips that countTrips made for the daycare may count: supply runs, field trips, transporting children in your care, and travel to required training, a licensing office or a bank for a business purpose. Driving your own children to school or making an ordinary personal trip does not become deductible merely because you operate a daycare.
- A trip that is part personalFor a mixed trip, record the business destination and purpose. An incidental personal stop during a trip made primarily for the daycare does not necessarily turn the whole trip personal, but adding a small daycare purchase to a primarily personal shopping trip does not make the mileage deductible.
- Make, model, the date first used for the business, and the year's total, business and commuting miles
People who help you
- An assistant or a substitute, and the payroll taxes on them
- Your own children, paid for real workThe work has to be real and age-appropriate: washing toys, setting out materials, helping clear up after closing. The rate is what you would have paid someone else for the same work.Tax tip. Wages to your own child under 18 in a sole proprietorship carry no Social Security or Medicare, and they move income into a much lower bracket. It needs a real job, a real rate and real records — but when it is done properly it works twice.
- Form 1099-NEC for anyone unincorporated you paid $2,000 or moreA cleaner, a music or gymnastics teacher who comes in, a handyman. The threshold rose from $600 for 2026.
- Contract cleaning of the daycare space
Licensing, training and professional costs
- Licence and registration fees, renewals and inspections
- Background checks and fingerprinting, for you and for your staff
- CPR, first aid and required continuing education
- Association membership and professional publications
- Liability insurance, and a daycare rider on the home policyMost home insurance policies exclude a business run out of the house. If you have not told your insurer, that is worth checking before it is worth deducting.
- Accounting, tax preparation and record-keeping software for the business
- Advertising, a website and listing fees
Your own taxes and benefits
- Quarterly estimated paymentsApril, June, September and January.
- Self-employment tax, and the deduction for half of it
- Health insurance you buy yourselfDeducted against income rather than on Schedule C, and only if you are not eligible for a plan through a spouse's employer.
- A SEP-IRA or a solo 401(k)
- The qualified business income deductionUp to 20 percent of business profit.
What you cannot deduct
The list that gets a home daycare return questioned. Most of it comes from treating the household and the business as one thing.
- Your own children's meals and snacks, and the Food Program money reimbursing them
- Your family's groceries, however they were bought
- A room the daycare never entersThe main bedroom, usually. Regular daycare use is the test, and it has to be real.
- The full cost of a shared itemA television, a sofa, a washing machine the family uses too. The business share only.
- Hours the house was merely availableOnly hours actually used for daycare or daycare work. 'Open all day' is not a number.
- Paying yourselfAn owner's draw is not an expense.
- Childcare for your own children while you work
- Clothing, unless it is genuinely unusable outside the work
- A home improvement deducted all at onceA new roof or a remodel is depreciated at your percentage, not expensed in the year it was paid for.
- Cash paid to a helper with no recordNo name, no amount, no date — no deduction, and a payroll problem on top of it.
Before you file
Three records decide a home daycare return: the hours log, the meal log, and the square footage of the house with the rooms daycare actually uses. None of them can be reconstructed convincingly in April, and together they are usually worth more than every receipt you kept all year.
Open the business checklistNot sure which of these apply to you?
A list is a starting point, not an answer. Bring your own numbers to a free intro call and we will work out which of these belong on your return and what is missing from your records.
This page is general information for the 2026 tax year, not advice about your business. A deduction has to be ordinary and necessary for your own trade, and your records have to support it. Amounts and rules are current as of the date of publication and can change.