In-home daycare tax deductions: records for the time-space percentage and more
By Arthur Teboul, DokuTrak · Published
In brief
Tax deductions for in home daycare center on the house: a share of rent or mortgage interest, utilities, insurance and repairs, set by a time-space percentage on Form 8829. Add food, toys, supplies and mileage on Schedule C, and keep the license, an hours log and a floor plan, since the home share rests on them.
The checklist: Family daycare provider’s file: license, time-space and food
Start with the license and the floor plan; they set the home share. Then add the year’s bills and logs, one line at a time.
- PDFPrint it or tick it off on screen.Free, no email
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- Excel trackerOne row per item, with a status column.Free, with your email
Build your own list: Answer 10 yes-or-no questions and the tax document checklist generator combines the lists that apply into one checklist.
License, space and hours
- Daycare license, certification, registration or exemption letterCopy valid for the tax year
- Floor plan with square feet of each roomDaycare-only rooms marked apart from shared rooms
- Hours logWeekly daycare hours, with set-up, clean-up and meal prep
- Time-space percentage worksheetArea share times hours share, from the Pub 587 worksheet
Home costs for Form 8829
- Form 1098 or the lease and rent paymentsMortgage interest or rent for the year
- Property tax billPaid in the year
- Homeowner’s or renter’s insurance declarationsPremium paid in the year
- Utility bills: power, gas, water, trash, internetTwelve months
- Repair and maintenance receiptsMarked whole-house or daycare-room only
- Home purchase closing statement and improvement receiptsFor depreciation, owners only
Food
- Daily meal and snack log per childBreakfast, lunch, dinner, snacks served
- Grocery receipts, if you use actual costsWith your family’s food kept apart
- Food program sponsor statementsMonthly reimbursements and any Form 1099-MISC
Supplies, helpers and families
- Toy, book, craft, diaper and cleaning supply receiptsFor daycare use
- Crib, high chair, gate and play equipment invoicesWith purchase dates
- Licensing fees, background checks, CPR and first aid trainingReceipts for the year
- Daycare liability insurancePolicy and premium paid
- Mileage log for field trips, grocery runs and trainingDate, destination and the children or supplies involved
- Payroll records and Forms W-2 for an assistant on staffWith the payroll tax returns filed for the year
- Form W-9 for each substitute providerPlus the 1099-NEC sent to anyone paid $2,000 or more for 2026 work
- Copies of Forms W-10 or W-9 you gave parentsOne per family that asked for your taxpayer number
- Enrollment contracts and year-end statements per familyAmounts paid, matched to deposits
- Last year’s return with Form 8829Prior depreciation and any carryover
Why a daycare home gets its own home office rules
Most home businesses must use a space only for work before they can deduct it. A family daycare is different. You do not have to meet the exclusive use test for the part of your home used as a daycare facility (IRS Publication 587). So the playroom your own kids use at night can still count.
The exception comes with a condition. You must be in the business of providing daycare for children, people 65 or older, or people unable to care for themselves (IRS Publication 587). You must also have applied for, been granted or be exempt from a license, certification, registration or approval under state law (IRS Publication 587). If your application was rejected or your license revoked, the exception does not apply (IRS Publication 587).
Keep a copy of the license or the exemption letter in the tax file every year. It is the first thing a preparer or an examiner will ask for.
The time-space percentage, step by step
Shared rooms are deducted by both area and time. The time-space percentage is the share of your home used for daycare, by square feet, multiplied by the share of hours it was used for daycare. You can compare business hours with the 168 hours in a week, or with the 8,760 hours in 2025 (IRS Publication 587). If you started or stopped daycare during the year, prorate the hours (IRS Publication 587).
Pub 587 gives a worked case. A provider used a basement for daycare 12 hours a day, 5 days a week, for 50 weeks, which is 3,000 hours (IRS Publication 587). Divided by 8,760, that makes 34.25% of the time (IRS Publication 587). A room used only for daycare is figured on area alone, without the time test, so list those rooms apart (IRS Publication 587).
| Step | What you need | Record that proves it |
|---|---|---|
| Area used for daycare | Square feet of each daycare room | Floor plan with measurements |
| Total area of the home | Square feet of the whole home | Appraisal, lease or your own measurement |
| Hours used for daycare | Weekly hours, including set-up and clean-up | Attendance and hours log |
| Total hours available | 8,760 for 2025 (IRS Publication 587) | Prorated if you opened or closed mid-year |
| Percentage | (Area used ÷ total area) × (hours used ÷ total hours) | Form 8829 or the daycare worksheet (IRS Publication 587) |
Food: grocery receipts or the standard meal and snack rates
Food is often the largest cost after the home. You can deduct 100% of the actual cost of food eaten by daycare children, but never the food your own family eats (IRS Publication 587). If you use actual costs, keep a separate record, with receipts, of your family’s food (IRS Publication 587).
There is a simpler route. The standard meal and snack rates are set amounts per meal served to an eligible child, and a family daycare provider can use them instead of receipts (IRS Publication 587). The amounts below are the ones Pub 587 gives for 2025; they are reset each year, so check the new edition before a 2026 return. You can claim at most one breakfast, one lunch, one dinner and three snacks per child per day (IRS Publication 587). Once you choose the rates for a year, you use them for all your food costs for eligible children that year (IRS Publication 587).
| 2025 rate | Breakfast | Lunch or dinner | Snack |
|---|---|---|---|
| Most states | $1.66 (IRS Publication 587) | $3.15 (IRS Publication 587) | $0.93 (IRS Publication 587) |
| Alaska | $2.66 (IRS Publication 587) | $5.10 (IRS Publication 587) | $1.52 (IRS Publication 587) |
| Guam, Hawaii, Puerto Rico, U.S. Virgin Islands | $2.14 (IRS Publication 587) | $4.09 (IRS Publication 587) | $1.22 (IRS Publication 587) |
Food program reimbursements
The Child and Adult Care Food Program is a USDA program, run through local sponsors, that pays providers back for meals. Its reimbursements are taxable only to the extent they exceed your food costs for eligible children (IRS Publication 587). Any excess goes in Part I of Schedule C; a shortfall goes in Part V (IRS Publication 587).
Leave out payments and costs for your own children if they are eligible for the program (IRS Publication 587). Follow the same method even when the sponsor sends a Form 1099-MISC (IRS Publication 587). With the meal rates, you deduct only the part of a rate above the reimbursement for that meal (IRS Publication 587).
Supplies, equipment, mileage and helpers
Costs not tied to the home go straight on Schedule C, such as advertising, wages, supplies, dues and equipment depreciation (IRS Publication 587). For example, toys, books, art supplies, diapers, wipes, cleaning products and paper goods all belong here. Cribs, high chairs and safety gates need the invoice and the date bought.
Drive time counts too. The run to the warehouse store for the week’s snacks, the trip to the library for story hour and the drive to a CPR class are business miles. In the second half of 2026 each one is worth 76 cents a mile (IRS mileage rates); the mileage log checklist gives the earlier rate and what each log line needs.
If an assistant works for you, keep the payroll records and the Forms W-2 you filed. If you pay a substitute provider as a contractor rather than an employee, collect a Form W-9; once your 2026 payments to her reach $2,000, send a Form 1099-NEC (Form 1099-NEC instructions).
What parents need from you at year end
Parents who claim the child care credit must give your name, address and taxpayer number on their return. They can ask for it on Form W-10 (IRS Publication 503). Fill in a Form W-9 or W-10 when asked, and keep a copy.
Give each family a year-end statement of what they paid. It helps them, and it gives you a check on your own income total. Keep enrollment contracts and receipts in the same folder, so the statements and your Schedule C agree. The document request email templates show how to ask families for missing forms.
Questions people ask
Does a daycare provider need exclusive use of the space?
No. The exclusive use test does not apply to the part of a home used as a daycare facility, if you are licensed, certified, registered or exempt under state law (IRS Publication 587).
How does the time-space percentage work?
Multiply the share of your home’s area used for daycare by the share of hours it was used for daycare. For 2025, the hours in the year are 8,760 (IRS Publication 587).
Can I use standard meal rates instead of food receipts?
Yes, as a family daycare provider. For 2025 the rate in most states is $1.66 for breakfast, $3.15 for lunch or dinner and $0.93 for a snack (IRS Publication 587). You still need a daily log of meals served.
Are food program reimbursements taxable?
Only the part that exceeds your food costs for eligible children (IRS Publication 587). Leave out your own children’s meals and payments.
Sources
- IRS Publication 587: Daycare exception to exclusive use and its licensing condition, time-space percentage with 8,760 hours in 2025, food rules, 2025 standard meal and snack rates, CACFP reimbursements.
- IRS mileage rates: Business rate of 76 cents a mile from July 1 to December 31, 2026.
- Form 1099-NEC instructions: The reporting threshold rose to $2,000 for tax years beginning after 2025.
- IRS Publication 503: Parents can use Form W-10 to request the care provider’s identifying information.
About the author
Arthur Teboul (Founder, DokuTrak) is building DokuTrak after watching professionals lose hours chasing clients for documents over email. Arthur Teboul.
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How this page was made (methodology): it is built from the primary sources listed under Sources, and every rule and figure on it links to the source it comes from. Last updated October 25, 2026. Spotted an error or a rule that changed? Contact us.
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