Every home childcare provider knows this moment. You open a drawer. Or a shoebox. Or your photo gallery. And you realize: “My receipts are everywhere… and tax season is coming.”
You’re not alone.
Most providers face tax time with a pile of scattered receipts, missing proof of payment, and questions about what the IRS actually expects from them. Here’s the good news:
Getting tax-ready isn’t about learning accounting. It’s about having the right system for your documentation — before January hits.
This guide breaks down exactly what the IRS requires, what counts as “proof,” and a simple weekly workflow you can use to stay organized (and claim every deduction you’re entitled to).
Running a childcare business from your home means you’re doing everything: teacher, cook, janitor, parent communicator, administrator — and sometimes accountant.
But here’s the truth: Poor organization costs providers real money. Good organization earns it back.
When documentation is missing, you risk:
The IRS doesn’t require perfection — but they do require compliance. And compliance starts with understanding the two types of documentation they need.
Most providers don’t realize that one receipt isn’t enough. The IRS requires two separate types of documentation:
| Proof of Purchase (What you bought) | Proof of Payment (That you paid for it) |
| paper receipt, digital receipt, email confirmation, invoice, screenshot of online order, store printout | bank statement with transaction, credit card statement, cleared check, PayPal/Venmo business confirmation, payment confirmation email, “order completed” screenshot |
❗ If you can’t show both, the IRS can deny the deduction even if the expense was real.
IRS Publication 583
“You must keep records to support the expenses you deduct… Your records must show the amount, date, place, and essential character of every expense.”
This is why documentation matters so much for home childcare — your business relies on everyday purchases.
Mohammed Aalen, CPA & Childcare Tax Specialist
“Childcare providers lose hundreds — sometimes thousands — simply because they can’t find proof of purchase or payment. Even $10 receipts add up when you buy them weekly.”
Want to learn more?
👉 Join our live Tax-Ready Webinar with Mohammed Aalen
| Schedule C — Your Business Expenses | Form 8829 — Business Use of Your Home. |
| This covers items like: toys, cleaning supplies, diapers, art materials, repairs, educational materials, office supplies. If you bought it for the children or your childcare space, it likely belongs here. | This is where Time/Space % comes into play. You’ll need documentation for: rent or mortgage interest, utilities, repairs, home insurance, household supplies, any shared areas used for childcare Time/Space % determines how much of your home expenses you can claim for childcare. |
Launching or expanding a childcare business requires significant capital investment. Fortunately, 2026 offers expanded
Per month:
$50–$150 in small untracked expenses
Per quarter:
$200–$500 in deductions lost
Per year:
$1,200–$3,000 missed on average — often higher if you forget larger purchases or home expenses
These are real dollars you could keep in your business.
“My receipts are everywhere.” – No central place = instant overwhelm.
“I forget what I bought things for.”– Your January self won’t remember a July purchase.
“I have the receipt… but I can’t find proof of payment.”– This disqualifies the deduction.
“I wait until January.” – This is the #1 cause of missed deductions.
“I don’t know what category expenses go into.” – Incorrect categorization = smaller refund.
This system is built for real home childcare life — fast, simple, and doable.
Step 1 — Snap your receipt immediately: A photo is enough. You won’t lose it.
Step 2 — Add a 3–5 word “purpose note”
Examples: “Daycare toys”, “Snack prep”, “Cleaning supplies”
Step 3 — Keep physical receipts in one envelope: Label it: Tax 2025 – My Childcare Business
Step 4 — Keep digital receipts in one place: Simple, searchable, stress-free.
Step 5 — Weekly 10-minute review. Match receipts to payments, categorize items, update hours for T/S%
Step 6 — Keep a quick list of large purchases
Furniture, repairs, equipment — these matter at tax time.
👉 This workflow alone can recover $1,200–$3,000+ annually.
Mohammed Aalen, CPA & Childcare Tax Specialist
“Providers who do a weekly 10-minute review save 5–15 hours at tax time and claim up to 20–30% more deductions.”
If you want the process to be easier, faster, and more reliable, bookkeeping systems can:
If you choose to go digital, choose a tool built for childcare, not general businesses. Parachute was designed for home childcare bookkeeping — but the decision remains yours. See all features →
You don’t need to reorganize your entire system today. Just take the first step: Upload your receipts into Parachute — free for 30 days — and end the year organized. One less thing on your January to-do list.
If you are a sponsored childcare provider, Parachute costs are not covered by your sponsor. However Parachute seamlessly integrated with KidKare, and also is a deductible business expense for your taxes.
