Daycare Facility

Daycare facility as a home based business is treated a little differently. If you use all or part of your home on a regular basis as a daycare facility to provide daycare services, you may claim home office deductions if you meet certain tests.

• You must provide daycare for children, daycare for elderly persons (age 65 and older) or daycare for persons who are physically or mentally unable to care for themselves.

   

• You must have a license, certificate, registration, or other approval as a daycare center or family or group daycare home under your state law.

You can claim home office expenses deduction if you have applied for approval for daycare and are waiting for it. You cannot claim home office expenses relating to daycare facilities if your application for daycare licenses have been rejected or your approval to run daycare facilities revoked.

Daycare exception for principal place of business test

Usually to be able to deduct the cost of the home office, the home office must be the principal place of business and the office space used exclusively for the home based business. This principal place of business test is satisfied if:

• there is no other fixed places of business to perform management or administrative activities
• you spend nearly all of your working time in the home office such as in the case of free lance writer or computer programmer

The exception to this principal place of business rule is in the case of daycare home based business. If the home based business owner uses his or her home for daycare operation, he or she does not meet the exclusively used for home based business requirement. in this case, the home based business owner running daycare facility out of his or her home must allocate expenses to the business use of the home not only by area but also my the time the area is used.