It's a business & you have to declare the income. However, in order to take expenses against the income, you must be operating a legal business. If running an unlicensed day care is a crime in IL, you won't be able to claim any expenses. If being unlicensed is just unlawful but not criminal, you can claim all reasonable & necessary expenses.
However, you will NOT be insured if one of those kids gets hurt on your property. If a friend visits you & is injured, your house insurance covers the medical bills. But every insurance company I've heard of excludes day care activities from coverage unless you have a special day care rider. How likely is it that a kid will get hurt? Gee, how many of us have scars from crashing into the fireplace hearth/coffee table/steps/dog? Can you afford to pay for plastic surgery out of pocket?
This post does not constitute legal advice, nor does it create an attorney-client relationship. Postings are based only on the information provided and you should consult an attorney in your area before relying on information contained in this post.