2019 Tax Changes

2019 Tax Changes Affecting Family Child Care

  • The standard mileage rate is $.58 per business mile.
  • the standard meal allowance rate for 2019 is $1.31 breakfast, $2.46 lunch/supper and $.73 snack.  Use these rates for all meals and snacks served in 2019 (including meals and snacks not reimbursed by the Food Program)  You may deduct up to one breakfast, one lunch, one supper and three snacks per day, per child.  No food receipts are necessary.  You must keep track of the meals and who you are claiming the meals for.
  • The 50% bonus depreciation rule in 2017 has been increased to 100% until 2022.  This means providers can deduct in one year the business portion of all items costing more than $2,500 (except for their home, home addition and home improvement) on IRS Form 4562.  Before 2018, items must be purchased new to qualify.  Starting in 2018 providers can purchase used items and qualify for this rule.
  • For items costing less than $2,500 providers can deduct the business portion in one year rather than depreciating them.  They should attach a statement to their tax return indicating they are electing this rule.  This rule is the same as in 2017.
  • Providers can reduce their federal taxable income by 20% of the lower of their business profit or family’s taxable income.  For example, if a provider had a $40,000 business profit (Schedule C) and her family’s taxable income was $50,000 she would only pay federal income taxes on $32,000 ($40,000 x 20% = $8,000).
  • The income limits to qualify for the IRS Saver’s Credit has increased to $64,000 (adjusted gross income) for couples filing joint and $32,000 for individuals or married people filing separately.
  • Although the corporate tax rate drops substantially to 21% in 2018, it still does not make sense for most providers to incorporate to get this lower rate.  Talk to a tax professional and a lawyer before operating other than as a sole proprietor (self-employed).