Home daycare tax deductions
Home daycare providers report income and expenses on Schedule C. The biggest deduction is usually your home: a share of rent or mortgage interest, utilities, insurance and repairs, based on the time-space percentage. Add food, supplies, toys, a share of household items and business mileage. Keep a record of the hours you use your home for daycare; it's the number the IRS asks about most.
The time-space percentage
Licensed (or registered, or exempt from licensing) daycare providers can deduct home expenses for rooms used regularly for daycare, even if the family uses them too at other times. The share is:
- Time % = hours the space is used for daycare in the year ÷ total hours in the year (8,760; 8,784 in a leap year). Include hours for preparing, cleaning and paperwork when children aren't there.
- Space % = square feet used regularly for daycare ÷ total square feet of the home.
- Time-space % = time % × space %.
Example
| Daycare 11 hours a day, 5 days a week, 50 weeks | 2,750 h |
| Prep, cleaning and paperwork, 1 hour a day | 250 h |
| Time %: 3,000 ÷ 8,760 | 34.2% |
| Space %: 1,400 of 1,750 sq ft used regularly | 80% |
| Time-space % | 27.4% |
| Home expenses $24,000 (rent, utilities, insurance, repairs) × 27.4% | $6,576 |
You claim it on Form 8829. A room used only for daycare counts at 100% for that room.
Simplified method
Instead of actual expenses you can use $5 per square foot, up to 300 square feet. Daycare providers who don't use the space exclusively for business multiply that by their time percentage. It's less paperwork but usually a much smaller deduction for a home daycare.
Other deductions
- Food: actual cost of food for daycare children, or the IRS standard meal and snack rates for family daycare providers, with a daily record of meals served. Subtract any food program reimbursement, or report it as income.
- Supplies and toys: 100% if used only for daycare; household items such as paper towels and cleaning supplies at your time-space percentage.
- Furniture and equipment: cribs, high chairs and playground equipment, often expensed in the year you buy them.
- Car: business trips such as field trips and shopping for daycare, at the IRS standard mileage rate or actual costs.
- Insurance, training, licensing fees, advertising and software.
Records that hold up
- Daily attendance with arrival and departure times: the base for your time %.
- A log of prep and cleaning hours.
- Receipts, sorted into daycare-only and household.
- Meal counts if you use the standard meal rates.
- Every payment received, so your income matches the statements you give parents.
Your hours, logged as you go. Daycare Binder Pro keeps a daily check-in and check-out log on your phone, and records every payment so your income and the families' statements match. $12 a month.
Open the appCan I count hours when no children are present?
Yes, time spent on daycare preparation, cleaning and recordkeeping in the space counts. Keep a written log.
Do I pay self-employment tax on daycare income?
Yes, if your net profit is $400 or more, on Schedule SE.
Does depreciation on my house count?
If you own your home, a time-space share of depreciation is part of the Form 8829 deduction. It can affect taxes when you sell, so ask a tax professional.
Sources: IRS Publication 587, Business Use of Your Home (2025), including the day-care facility rules; Form 8829 instructions. Checked October 31, 2026. General information, not tax advice.