Top 5 Tax Deductions Every Daycare Owner Should Claim

Owning and operating a daycare business is both rewarding and demanding. Whether you run a home daycare or a larger childcare center, you’re responsible for providing a safe, nurturing environment for children—and that comes with significant business expenses.

The good news? Many of these costs can be tax-deductible, helping you keep more of your earnings. In this guide, we’ll explore the top 5 tax deductions daycare owners should claim—and why business insurance is a critical expense that not only protects your business but also lowers your tax bill.

1. Business Insurance (A Must-Have for Daycare Owners!)

Why It’s Deductible:

Running a daycare means taking care of children—a huge responsibility that comes with potential risks. From injuries on the playground to property damage, daycare owners need business insurance to stay protected from financial and legal issues.

Essential Insurance Policies for Daycare Owners:

✔ General Liability Insurance – Covers injuries, accidents, and property damage that happen on your premises.
✔ Professional Liability Insurance (Errors & Omissions) – Protects against claims of negligence, such as improper supervision or accidental harm.
✔ Commercial Property Insurance – Covers damage to your daycare’s physical space, whether it’s a rented facility or your home.
✔ Workers’ Compensation Insurance – Required if you have employees, covering work-related injuries and illnesses.

💡 Pro Tip: Insurance premiums are 100% tax-deductible, meaning you can stay protected while lowering your taxable income!

2. Home Office Deduction (If You Run a Home-Based Daycare!)

Why It’s Deductible:

If you operate a home daycare, a portion of your home expenses—like rent, mortgage, utilities, and maintenance—may be deductible.

How It Works:

✔ The IRS allows a simplified deduction ($5 per square foot, up to 300 square feet).
✔ Alternatively, you can calculate the actual expenses and deduct a percentage based on how much of your home is used for business.

💡 Pro Tip: To qualify, your daycare space must be regularly and exclusively used for business purposes.

3. Educational Supplies & Childcare Materials

Why It’s Deductible:

Daycare owners purchase a variety of learning and play materials to keep children engaged and provide quality care. These expenses are fully deductible as business-related costs.

What You Can Deduct:

✔ Books, puzzles, and educational toys
✔ Art supplies (crayons, paint, paper, glue, etc.)
✔ Classroom furniture (tables, chairs, shelves)
✔ Nap mats, cots, and bedding for kids
✔ Safety equipment (baby gates, outlet covers, first aid kits)

💡 Pro Tip: Keep detailed receipts for all supplies to ensure proper documentation during tax season!

4. Meals & Snacks for Children (Food Program Deductions)

Why It’s Deductible:

If you provide meals and snacks as part of your daycare services, these expenses may qualify as a business deduction.

How It Works:

✔ If enrolled in the Child and Adult Care Food Program (CACFP), you can deduct only the portion of costs not reimbursed.
✔ If not part of CACFP, you can still deduct the full cost of food, beverages, and meal prep supplies.

💡 Pro Tip: Maintain detailed records of all food expenses, including grocery receipts and meal logs.

5. Employee & Contractor Wages (If You Have Staff!)

Why It’s Deductible:

If your daycare hires assistants, teachers, or staff, their wages and payroll taxes are fully deductible business expenses.

What You Can Deduct:

✔ Salaries and hourly wages for employees
✔ Payroll taxes (Social Security, Medicare, and unemployment taxes)
✔ Independent contractor fees (e.g., part-time teachers, cleaners, or special activity instructors)

💡 Pro Tip: Even if you hire a freelance accountant or legal consultant to manage your business, their fees are deductible!

Final Thoughts: Save Money & Protect Your Daycare

Running a daycare comes with many business expenses—but the good news is that many of them are tax-deductible. By claiming business insurance, home office expenses, educational supplies, food costs, and wages, you can lower your taxable income while keeping your daycare safe and financially secure.

Need to protect your daycare with the right insurance coverage? Get an instant quote from Bunker today! If you’re interested in learning more please visit buildbunker.com or contact us at support@buildbunker.com!