Can anyone tell me how the income tax thing works for daycare.

[Julie]

I keep all my receipts for groceries and gas i mark things on the receipts that are for the daycare by putting a check mark beside it. Am i wasting my time doing this or is it good that im trying to tell the gov what i actually buy for the daycare.

And what else do i need to send in to them???

Thanks so much.

[playfelt]

Go to the revenue canada site and there is a brochure for daycare providers that outlines what you can and can not claim. Yes you need to know exactly what you spend on the daycare as only those amounts can be deducted from your income and you need to keep them for 7 years in case they audit you and want proof that you bought what you are claiming you did.

[mom-in-alberta]

Yes, that is the best place to start.
Try this link:

http://www.cra-arc.gc.ca/tx/bsnss/tp.../menu-eng.html

[bright sparks]

What area are you in Julie?? I have a terrific accountant who specializes in home daycare tax returns and they charge a really reasonable rate. Saves time and also has all the facts without the need to read all the jargon which is both time consuming and quite often is made out to be way more complicated than necessairy IMO. For example if you spend a certain amount on food for your daycare children, it doesn't automatically mean you can write it all off. The maximum guideline per child per day for 2 snacks and 1 meal is $10. This doesnt mean you can't claim for more but make sure its completely legitimate as you are at a much higher risk of being auditted. The same with km, gas, general maintenance of your car. There is a maximum amount per km that you can claim for this. Let me know where you are and if its feaseable I will forward the accountants info on to you.

[Inspired by Reggio]

....The maximum guideline per child per day for 2 snacks and 1 meal is $10.....The same with km, gas, general maintenance of your car. There is a maximum amount per km that you can claim for this. Let me know where you are and if its feasible I will forward the accountants info on to you.

Hmmm - I have read just about every article put out my Revenue Canada for using your business for home childcare and have never come across a 'cap' on how much you can claim for food or vehicle expenses .... it just says you can write off any 'reasonable expense incurred through operation of your business'?

While I agree that being too aggressive with write offs can get you red flagged for an audit - if you are truly spending $15 a day per child on food for example - write it ALL OFF and keep your documentation for proof why should you suck up the cost of that and pay taxes on something you should not have to? My understanding is that the only thing with caps are your capital cost allowances for major purchases and there are tables for figuring that out provided?

So with food you have to have the receipts and documentation to back up your expenses as 'reasonable' you cannot just say I spent $8 a day per child ... cause if you are claiming that much in groceries you better have receipts that show you spent $200 a week on groceries PLUS receipts for your own family in addition to that to show them you fed your own family separate from that.

Plus my understanding is that your vehicle expenses are determined by adding up all the cost of your vehicle that year from the gas used, insurance, repairs and maintenance, registration and renewal of your plates and so forth and than determining that your business use was over your personal use by logging your trips for business to track your KM .... so one year if I had 'no' maintenance on my vehicle my write off might only be small but the next year if I had to do $8000 in repairs on it my write off would be that much higher?

Also my advice of the day - while accountants are helpful you still need to know the rules yourself cause if your accoutant graduated at the BOTTOM of their class in school that means there is 40% of the information out there they did not retain - and if if pertains to your business you can find yourself audited and it is YOU who has to pay the back taxes and so forth not the accountant

For example I have peers whose accountants tell them they can write off 50% and up of their shared expenses of their home .... however if you use the CRA's equation for our industry to determine your shared expenses that would mean that you are using 100% of your square footage of your home for business, it would mean you are open at least 12 hours a day and that you are working 365 days a year ... because that is how our equation works and the only way you can get as high as 50% .... if you are writing off MORE than 50% that would mean you are working more than 12 hours a day everyday and so forth?

However most accountants are use to figuring out 'dedicated to business space' .... like a hairdressor or home spa or mechanic with a home garage where the space is NEVER used for personal family use and they just use the square footage of the house over square footage used and stop there - which is not correct for us and if audited you are going to be owning a lot of back tax cause shared expenses add up ... that is your mortgage interest, property tax, gas, hydro, sewage and so forth which is a large chunk of our write offs!

For shared space equations for home childcare it is

(the square footage used for business divided by the square footage of your total home) x (number of hours open for business divided by 24 hours in a day) x ( number of days business is run / 365) = % of business use

[bright sparks]

@Reggio

I agree with claiming for exactly what you pay out on food, which is what I do. I didn't and wouldn't tell people to suck up the extra cost above $10 per day. However the 'reasonable amount' that is said is $10 per day. That being said, please read that I put $10 per day for 1 meal and 2 snacks. A lot of providers do breakfast and additional snacks, maybe even a light dinner if a child is doing long hours so this warrants a higher write off because of course you are spending a lot more on food and if you keep all the reciepts then theres no problem. I feed my daycare children organic and naturally raised/produced foods and make everything from scratch, no exceptions and $10 covers it for 1 meal and 2 snacks. Also bear in mind that if you get auditted you can show as many reciepts as you like but it all depends on who is auditing you. They can say its not a reasonable amount to be spending per day on food when your reciepts are full of say tinned or frozen veg instead of fresh veg for example and they could quite easily ask you to prove that none of this food was used to feed your own family. Yes we can shop seperatly and show different reciepts but ultimatly if you get an awkward auditor they may not take your word for it and not allow you to write it all off. This is why I make sure I dont spend more than the $10 per day per child so as not to attract attention and get audited. Who has time to be auditted if we can take preventative measures in advance. IMO I prefer to play it safe. If I could justify it and it was something I was unable to keep down, then I would claim the larger amount. So far I have been lucky. I am pretty sure the caps are just for capital items over a $200 purchase price the rest are just guidelines to prevent a red flag as you said.

I am very fortunate to have a great accountant. I used to do my own taxes but found this accountant through my daycare association and have since been very happy with him. He follows guidelines to a T and specializes in home daycares. The company has been filing taxes for the Burlington sector of Halton Childcare providers association for well over 10 years and there are over 80 members and we are very active members and I have never heard of any problems. I know personally a few providers who have been auditted due to higher than average expenses and it turned out that everything was in order with their paperwork.

Thanks for your feedback on the subject. Always great to hear others opinions and learn new things

[playfelt]

No matter what your grocery receipts are full of cans or bottle or boxes or bags of produce it shows what you paid to feed daycare and your own family which presumable is pretty similar as in no one is going to go to all the trouble of organic foods and meals from scratch for daycare and then zap a microwave dinner for the family. Revenue Canada will take all of your receipts the number of people in your family and the number of daycare kids and meals served and determine what percent of the bill applies to each. $10 might not seem like a lot of money but times 5 kids that is $50 a day or $250 a week or about $1000 a month. I'm sure even using mostly organic that most can manage to feed within that limit.

[bright sparks]

I find that a budget of $1000 per month covers my daycare food easily so the $10 a day amount works great for me.

[sandylynn]

$50.00 a DAY! What are you feeding these children? Can I come to your house for snack and lunch! I would think that would definitely invite an audit! Just curious....has ANYONE here been through an audit?

[bright sparks]

$50.00 a DAY! What are you feeding these children? Can I come to your house for snack and lunch! I would think that would definitely invite an audit! Just curious....has ANYONE here been through an audit?

Bear in mind this thread is really old and I have since reduced my costs by making changes, not because of auditing but because my area became very competitive and I needed to reduce my costs when I had spots open with zero enquiries.

$50 may seem like a lot, in fact it is a lot but I was serving a 100% organic meal plan along with nothing processed, everything made from scratch, everything fresh from meat to veggies and also offered a gluten free menu so organic gluten free grains. My accountant has told me that up to $10 per child per day for food is considered a fair amount to claim without the worry of being audited. When I lived in Burlington, the place was saturated with providers so to give myself a neesh, I offered an organic plan and accommodated allergies which drew families who cared about nutrition in and created a wait list. I was able to charge more per day due to the income level of my area. When I moved to Niagara Region the meal plan still drew lots of families in although my rate did go down a little as the poverty rate is higher here and income levels are generally a bit lower or people have higher travel costs at the very least, so my expense obviously increased. I also haven't had a rate increase for a good few years and so again, the expense of food falls on me. This year I have calculated my food and while I started out higher at the beginning of the year it has averaged out to $8 per child per day and I work 4 days a week now, not 5. I no longer offer a full organic plan to counter the lack of fee increase in light of the fact that inflation in food costs occurs annually regardless. I do not buy organic meat but abf instead which saves me a little, not a lot, and we are meat free 50% of the time which saves me the most. I serve less fruit and more raw veggies, again saves a decent amount monthly when my crew have healthy appetites. I have always had great eaters, only a couple out of the 30+ have eaten like mice. I spend about $150 a week on average now for 4 kids for 4 days. It's a real struggle too I find to feed them healthy but just takes more planning and certain things like lasagne that are expensive to make just never go on my menu. I price match like a crazy person too and when something is on sale I buy multiple and stock pile it. pc plus is also amazing as its tailored to your buying habits so I regularly get items for a steal from the natural food department which makes a big difference. In 2014 I signed up and since August I have redeemed over $400!!