I recently started watching two children and I was wondering if someone can tell me what types of receipts etc I should be tracking for business expenses.
We have been doing some work to the house (had some trees removed to free up yard space, new fence, etc) and I'm wondering if any of that could be deducted.

Only space used 100 percent just for the business. So if you have a addition to the house only used for day care but if this area is used for any personal use when not open. Often this will stop you from deducting any of the cost on that area.

Actually, some of those costs CAN be deducted on a pro-rated basis.

Can you tell me more? I am wondering about craft supplies, food, utilities, birthday/Christmas presents I buy for the kids I watch, taking them for ice cream, etc.

All the items listed are valid deductions on Schedule C for your child care business.

The utlities are pro-rated based on the percentage of the home used in the day care business. The rest are full deductions.