Did you know that when using chid care meal rates to calculate your food deduction for income tax purposes, your choice will affect restaurant meals, as well as meals served at home?
Count the heads of daycare children when taking them out to eat if you are using the standard meal allowance rates to calculate your food deduction for meals served at home. In that case, you must also use the meal rates for day care children's meals eaten at restaurants. This has nothing to do with food program meal counts or reimbursements. This rule only affects your income tax return food deduction.
If you want to deduct the actual cost of kids' restaurant meals, then you must deduct the actual cost of groceries for at-home meals, too. Your choice can change from year to year, but for any given year, you must use either the meal rate method or the actual grocery cost method for both meals served at home and those eaten in restaurants.
This rule applies to meals for children in your care. If you have an employee with you at a restaurant outing with the daycare kids, you can deduct the actual cost of the employee's meal. You have no choice here, in fact, because meal rates cannot be used for a helper's meal. Whenever you supply a meal to an employee during work hours (at home or away from home), you can take a full deduction based on the actual meal cost. (If you take your employee out to dinner after hours for employee morale or to talk business, you can also take a deduction, but only for 50% of the cost. This is a "meals and entertainment" category that's different from food served during business hours as a business necessity.)
Note that this rule does not apply when you purchase or prepare food for an activity, such as a cake for a birthday celebration or ingredients to make a gingerbread house. Because this is special activity food, and not a meal, you must deduct the actual cost. This is so even if you are using the meal rate method to figure your regular food deduction.
Refer to the food chapter in Tom Copeland's Family Child Care Record-Keeping Guide for further guidance. Tom also has an article on deducting expenses for other types of business meals.
Last updated 17 December 2012