Day cares

Day cares

Income earned from caring for children under 18 is generally taxed under the Child Care B&O tax classification. This includes no-show fees and charges for late pick-up. Child care is not considered a retail sale, so you do not need to collect sales tax.

If your B&O tax due is below a certain amount, you are entitled to a small business B&O tax credit. This credit is automatically calculated when you file electronically.

Alternatively, if your business meets certain criteria, you may qualify for active non-reporting (ANR) status. Businesses on ANR status are considered actively engaged in business but are not required to file tax returns with the department.

Deductions and exemptions

Businesses primarily engaged (more than 50%) in providing child care
Starting Oct. 1, 2024, if you are primarily engaged (more than 50%) in providing child care services, you may deduct income earned from caring for children for less than 24 hours if they are either:

  • Under 13 years of age.
  • Under 19 years of age with a verified special need or under court supervision as determined by the Department of Children, Youth, and Families under chapter 43.216 RCW.

You must include these amounts in your gross income and then take the “Child Care for Children Under 13, Under 19 with Verified Special Need or Under Court Supervision” deduction.

This deduction expires December 31, 2034.

Care of children under eight years old

If you are not primarily engaged in providing child care, you may deduct income earned from caring for children under eight years old who are not in first grade or above. You must include these amounts in your gross income and then take an “Other” deduction with a description such as “Child care for children under 8.”

Care provided in church facilities

B&O tax does not apply to income from child care provided by a church that is exempt from property tax under RCW 84.36.020, no matter the children’s ages. You do not need to report this income on the excise tax return, and you may not need to register with the Department of Revenue.

Care paid by federal or state government

Nonprofit corporations that qualify as health or social welfare organizations can deduct payments from federal, state, or local governments for providing health and social welfare services like day care. You must include these amounts in your gross income and then take an “Other” deduction with a description such as “Health and social welfare services.”

References

  • RCW 82.04.2905 Tax on providing day care
  • RCW 82.04.4282 Deductions – Fees, dues, charges
  • RCW 82.04.431 Health or social welfare organization defined – Conditions for exemption – Health or social welfare services defined
  • WAC 458-20-167 Educational institutions, school districts, student organizations, and private schools
  • WAC 458-20-169 Nonprofit organizations