How To Maximize Your In-Home Childcare Income

When people think about starting their own in-home childcare program, one of the first questions we hear is “I love working with kids but I have no idea how the financials will work.” That is why MyVillage teamed up with childcare business expert, Tom Copeland, to present a webinar on how in-home childcare providers can maximize their take-home pay without having to raise rates for families.

What Tom covered was just the tip of the iceberg, which is why every year MyVillage Educators receive a free one-on-one tax review with Tom as a benefit to joining the MyVillage community. Our goal is to have all of our providers increase their bottom line so they can do what they love, care for kids!

Here are the Top 5 Ways In-Home Childcare Educators Can Maximize Their Income*

1. Keep Strong Records:

Record keeping can be a pain, but if you do it right, it’s going to be the main way you can maximize your tax savings. You should be keeping a general record of things like daily attendance, tuition, food subsidy program, local grants, expenses, receipts, etc.

Best Practice Tips:

  • Review your records monthly while everything is still fresh in your mind.
  • Keep all records for at least 3 years. The IRS can audit back 3 years, and you can amend your taxes back 3 years.
  • Services like MyVillage train and support all Educators on software tools that manage their program’s finances & write offs – making record keeping easy-as-pie!

2. Track Your income:

Keeping track of your income is important, especially when it comes to sitting down with your accountant. Make sure you report all money you receive as well what that money was for. It’s always a good idea to set up separate business account to make it easier to track income and expenses specifically for your program.

Best Practice Tips:

  • Write on all deposits what that money was for, and if it was personal or for business. For example, if it is money from the food subsidy program it’s business, but if you received money for your birthday, it’s personal.
  • Get a signed receipt from each parent at the end of the year and include your EIN number as your identification number. Never give a parent your social security number.
  • If you’re a MyVillage Educator, all of this is kept track for you in the MyVillage Hub! We make it easy for you at the end of the year to pull all your parent invoices, food program reimbursements, and even has a space where you can upload and save your receipts!

3. Track Your Expenses:

To write off your deductions, you must have an adequate record of all of your expenses. Receipts are the best way to show what you purchased, so when a receipt is given, make sure you are recording what it is for, and saving it. If you go to a garage sale, or pay with cash and can’t obtain a receipt, make a note of how much it cost, what the item was, and where it was purchased. When purchasing something, it will most likely not be 100% personal or 100% for your program. Always mark your receipts if they are 100% business or shared so you can easily break them out.

Best Practice Tip:

  • Keep all receipts in the same place so they are easy to file and find. An accordion folder marked for each month is one of the easiest ways to do this!

4. Claim Your Deductions:

in-home childcare income planningWhen it comes to your deductions, you can claim anything that is “ordinary and necessary” to keep your childcare program operating. This includes everything from items to maintain the home (snow shovels, lawn mowers, light bulbs, etc.) to anything kids use in your program (toys, books, furniture, etc.)

When it comes to filing your deductions there few things to keep in mind. If you buy something that is used just for you, it is not deductible. If it is something that you never use personally, you only use it for your program, you can write off 100% of it. If it is something you share with your everyday home and your childcare, you will want to calculate your shared time/space percentage. You can learn more on how to do that by visiting Tom’s blog HERE.

Best Practice Tip:

  • You should be tracking your car expenses. You can claim trips that are for business purposes and can include things like tolls, parking, portions of repairs, loan interest, etc. Make sure you keep adequate receipts & records.

5. Join the Food Program:

This is a program that all childcare providers would make more money if they joined! Tom recommends following the Standard Meal Allowance so you do not have to save all your food receipts. To get the allowance you would add up all the meals and snacks you served over the year and multiply it by the annual allowance. 2018/2019 rate is $1.31 for breakfast, $2.46 for lunch/dinner and $.73 for snack.

Best Practice Tip:

  • Keep daily records of what you serve, you can deduct 1 meal and 3 snacks a day per child

This is only the beginning of how you can save money on your taxes to maximize your income. If you’re wanting to receive a free tax review with Tom, CLICK HERE to connect with one of our MyVillage Community Members who can tell you more!

***The above is for informational purposes only, and is not intended to provide, and should not be relied on, for tax, legal or accounting advice. Always check with your own tax, legal or accounting advisors to make sure you are correctly accounting for all deductions.***