Tax Information

Go to pdfIRS Tax Center

Family Child care providers are self-employed and need to report their business income and expenses to the IRS. It is important to become familiar with requirements for filing your taxes.

What is income?

  • Parent fees

  • Food program reimbursement – See CACFP for more information

  • Fees received from the county, city or CCTAP

  • Grants

What is taxable income?

Income – Deductions = Taxable Income

What are deductions?

As a child care provider, you are eligible to deduct a certain amount of accrued business expenses from your yearly income to reduce your taxable income. Some expenses are 100% deductible.

What is 100% deductible?

  • Advertising Costs

  • Office expenses

  • Supplies used only for daycare

  • Magazines/books

  • Trainings

  • Membership fees

  • Liability insurance

  • Food

Partial deductions are things purchased for both day care and your home, such as:

  • House repairs and maintenance

  • Property tax

  • Mortgage interest, homeowner’s insurance

  • Utilities

  • Rent and renter’s insurance

  • Home improvements

  • House depreciation

Use time-space percentage for partial deductions:

Partial deduction means you are able to deduct a percentage of the cost from your income and is based on a time-space percentage. Use the following formula to calculate your percentage:

(Number of square feet of home used for business/Total # of square feet of home) X (Number of hours home is used for business/Total # hours in year) = Time-Space %

Think Small (formerly Redleaf National Institute): The Time-Space Percentage

Track all the hours children are present and business hours that children aren’t present (cleaning, preparing activities, record keeping, interviewing parents, etc.) to determine how many hours you are using your home for business. Track at least two months closely to determine a total for the year.

Try to use all the rooms in your home on a regular basis for your business.

Think Small (formerly Redleaf National Institute): Record Keeping and Taxes