Childcare Accounting Tax Deductions & Travel Expenses

February 5, 2024

Childcare Accounting Tax Deductions & Travel Expenses

Does your Early Childhood Education business require you to travel? Check out the following guide to tax-deductible childcare accounting travel expenses. We cover what business-related travel expenses are deductible and how to claim the deductions on your annual tax return. 

According to the IRS, business travel expenses are the ordinary and necessary expenses of travel away from your tax home or main place of work for business purposes. 

The IRS further defines a few of the terms in its description of business travel expenses above:

Ordinary and necessary” – Business-related travel expenses must be reasonable and required. Expenses that are lavish and extravagant, or made for personal purposes, are not deductible. 

Tax home” – Generally, your tax home is the entire city or general area where your main place of business or work is located, regardless of where you maintain your family home. 

Travel for business purposes” – You’re traveling away from home if your duties require you to be away from your tax home for a period substantially longer than an ordinary day’s work, and you need to get sleep or rest to meet the demand of your work while away.  

The following business travel expenses are tax-deductible, according to the IRS:

  • Travel by airplane, train, bus, or car between your home and your business destination.
  • Fairs for taxis or other types of transportation between:
    • The airport or train station and your hotel,
    • The hotel and the work location of your customers or clients, your business meeting place, or your temporary work location.
  • Shipping of baggage and sample or display material between your regular and temporary work locations.
  • Using your car while at your business destination. You can deduct actual expenses or the standard mileage rate, as well as business-related tolls and parking fees. If you rent a car, you can deduct only the business-use portion for the expenses. 
  • Lodging and non-entertainment-related meals.
  • Dry cleaning and laundry.
  • Business calls while on your business trip. (This includes business communications by fax machine or other communication devices.)
  • Tips you pay for services related to any of these expenses. 
  • Other similar ordinary and necessary expenses related to your business travel. (These expenses might include transportation to and from a business meal, public stenographer’s fees, computer rental fees, and operating and maintaining a house trailer.)  

The IRS allows you to deduct travel expenses paid or incurred in connection with a temporary work assignment away from home. However, it does not allow you to deduct travel expenses paid or incurred in connection with an indefinite work assignment; a work assignment greater than one year is considered indefinite. 

In addition, the IRS allows you to deduct travel expenses for national conventions if you can demonstrate that your attendance benefits your business. Special rules apply for conventions held outside of North America. 

Business-related foreign travel expenses are also childcare accounting tax-deductible based on the criteria above, but the IRS strictly regulates these expense deductions to ensure that taxpayers aren’t taking advantage of business trip opportunities to add on excessive personal travel plans. 

For all business-related travel expenses, you should keep proper documentation to substantiate your tax-deductible expenses. Keep well-organized records, including receipts, cancelled checks, and other documents to support a deduction. These records will make it easier to prepare an accurate tax return. 

We hope this brief guide helps you determine whether travel expenses related to your Early Childhood Education business may be tax-deductible. 

As always, we recommend consulting a qualified tax professional to review your eligibility for specific tax credits and deductions. 

Contact the tax experts at Honest Buck today.

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