grandparent providing child care

[Donna0220]

I am being paid for child care to watch my 2 grandchildren in my home.

I provide meals and snacks and drive to pick them up, to and from school and preschool.  Can I deduct these costs from the amount that I am paid?  Using the IRS guidelines for amounts for each meal/snack and the IRS mileage rate, I will end up with a net loss.  Which schedule should I report the income and expenses?

[LindaS5247]

Please clarify your question by adding some additional information so we can provide a more helpful answer.  Are you reporting the income you receive for caring for your grandchildren on your tax return?  Do you receive a 1099-MISC? Do you care for other children in your home?

Please feel free to come back to TurboTax Community with additional information or questions or click here for help in contacting Turbo Tax Support. 

[Donna0220]

Yes, I care for the children in my home.  Yes, I plan to claim the income on my tax return since my daughter is reporting the payments to me on her Form 2441, with my identifying information.  No, I did not received a 1099-MISC from anyone.

I'm thinking  I need to report it on a Sch C.

[DianeW777]

Yes, you can report the income on Schedule C since the care is provided in your home.  You can take expenses for mileage and meals for the care you provide to your grandchild/grandchildren.

• IRS Publication 587 - Daycare Facility:  
• If you use space in your home on a regular basis for providing daycare, you may be able to claim a deduction for that part of your home even if you use the same space for nonbusiness purposes. To qualify for this exception to the exclusive use rule, you must meet both of the following requirements. 
  • • You must be in the trade or business of providing daycare for children, persons age 65 or older, or persons who are physically or mentally unable to care for themselves.
  • • You must have applied for, been granted, or be exempt from having a license, certification, registration, or approval as a daycare center or as a family or group daycare home under state law. You do not meet this requirement if your application was rejected or your license or other authorization was revoked.

You can use the meal/snack rates in this publication as well as a chart to track the meals and snacks (pages 14 & 32).  Be sure to track your business miles in a log or application on your phone or computer.

IRS Guidance: A business allows you to deduct the costs necessary to obtain the income.  The law explains that 'you must be engaged in the activity to produce a profit'.  The test under IRS tax law is that you must show a profit three out of every five consecutive years to be considered a business.

• How do I report income from self-employment?