Paying Taxes: Do Individual Child Care Providers?

The IRS considers childcare providers as independent contractors, and they should report their income on Schedule C. If your income minus self-employment expenses is more than $400, you must file Schedule SE to determine your taxes for childcare. If you are a child care provider without a W-2, learn how to file your taxes. Special tax benefits are available for those providing daycare services for children and the parents who pay for those services.

To claim a deduction, most tax professionals recommend including reimbursements in your gross business income and then claim a deduction. Even if you operate your daycare business as a sole proprietor or have a child care provider, you should not include all your income on your taxes, such as leaving out a 1099 received from the Child Care Resource and Referral agency for subsidized care. Many home-based child care businesses will receive a 1099-NEC for subsidy care payments and participation in the Child and Adult Care Food Program (CACFP).

In-home childcare providers pay between 20 and 30 in taxes, including state and federal taxes when applicable. Correct reporting of in-home caregiver taxes has several tax benefits, including the availability of the Sec. 21 child tax credit. To claim the childcare credit, you must enter the Social Security number or Tax ID of the person who was paid to take care. If your family member isn’t your employee, they will be responsible for paying any applicable self-employment taxes on the child care center.

If your child attends a registered childcare center, you may receive childcare benefit as a freelancer/self-employed professional. Most in-home childcare providers pay between 20 and 30 in taxes, including state and federal taxes when applicable.