Taxpayers that are in the business of providing family day care may deduct the ordinary and necessary expenses of their business, including the cost of providing meals and snacks to children in their care. (Code Sec. 162)

Because family day care providers often buy food for their own families and for their family day care business, they may have difficulty substantiating the family day care portion of their food costs. It's also burdensome for these taxpayers to keep receipts for all food bought during the year for both family day care and their own family's personal use.

To minimize disputes with family care providers about the amount of their meal deduction and the quality of their substantiation, IRS will allow them to use standard meal and snack rates to compute the deductible cost of food instead of deducting actual costs. Recordkeeping also is simplified if standard rates are used. (Rev Proc 2003-22)

The simplified deduction for each meal and snack bought and served to an eligible child during day care is equal to the US Department of Agriculture's Tier I Child and Adult Food Care Program (CAFCP) reimbursement rates for meals and snacks served in day care homes. The rates for each tax year are those Tier I rates in effect on the preceding Dec. 31.

The rates do not include the cost of non-food supplies (e.g., utensils), which may be deducted separately. The number of meals per day per child is limited to a maximum of:

If the provider receives some form of reimbursement or subsidy, they deduct only the part of the simplified rate that exceeds the reimbursed amount.

The rates may be used only by taxpayers (whether or not licensed, registered, or otherwise regulated) providing care in their homes to unemancipated children, and only with respect to children they are paid to care for and who don't reside in the home. (Rev Proc 2003-22, Sec. 3; Rev Proc 2003-22, Sec. 4)

Family Day care providers that use the simplified rates must use them to deduct meals and snacks for the entire tax year, but they can switch to deducting actual substantiated amounts in another tax year. (Rev Proc 2003-22, Sec. 5.02)

Family Day care providers using the standard rates must keep records substantiating their computation of the total deductible amount. The records should include the name of each eligible child, dates and hours of attendance in the family day care and the type and quantity of meals and snacks served. Appendix to Rev Proc 2003-22 includes a suggested record Log. Users of this log will be treated as having met the substantiation requirements. (Rev Proc 2003-22, Sec. 5.03)

See the guide "Tax Information Regarding Business Use of the Home".