You're Told "No", but the IRS Says "Yes"
All family child care providers must follow their state's child care licensing rules and Food Program rules.
However, there are a few situations where the IRS allows you to claim deductions when licensing or Food Program rules prohibit you from doing something.
Here are three examples:
Food Program rules only allow you to claim up to three servings a day per child (two meals and a snack, or two snacks and a meal). However, IRS rules allow you to deduct up to six servings a day per child (one breakfast, one lunch, one supper and three snacks).
If your child care licensing rules prevent children from using your basement or other room in your home, IRS rules may allow you to claim such rooms as regularly used for your business. If your basement contains a laundry room, furnace, and storage rooms containing items used for your business you can count your basement as regularly used for your business. If you have an upstairs office that is off limits to children, you can count this as regularly used. See the Uphus Tax Court case.
If you are exempt from your state's child care licensing rules you can still deduct all expenses associated with your home in the same way as if you were licensed. See IRS Publication 587 Business Use of Your Home, page 14.
Therefore, don't let the limitations of licensing or Food Program rules prevent you from taking advantage of IRS rules that allow you to deduct business expenses. The IRS is not a nutrition program and the ability to deduct items is not dependent on licensing rules.
Tom Copeland - www.tomcopelandblog.com
Image credit: https://www.chalkbeat.org/2020/3/19/21196072/child-care-providers-are-feeling-an-unprecedented-squeeze-now-they-re-asking-for-help
