All family child care providers are better off financially if they join and stay on the Child and Adult Care Food Program.
If you serve a breakfast, lunch and one snack a day to children the Food Program will pay you about $500 or $1,000 a year per child. Yet less than half of all eligible child care providers are participating on the Food Program.
There are three common objections to participation.
1) “If I join the Food Program I’ll pay more in taxes.”
This is true. However, it’s also true that you’ll pay more in taxes if you win the lottery, if your husband gets a raise, or if you raise your rates.
The reimbursements you receive from the Food Program are taxable income (See my article on this). Therefore, your taxes will go up. But, what’s more important than how much tax you pay is how much money you will have after you pay your taxes. For every $1,000 you get from the Food Program you will keep about $600-$700 after taxes.
2) “I will lose some of my food deductions if I participate on the Food Program.”
False. Whether you are on the Food Program or not you will deduct your food expenses in the same way. Let’s say you are not on the Food Program and spend $4,000 a year on food for your business. Once you join the Food Program you will still be able to deduct the same $4,000 as a business expense. The only difference is that you now are receiving reimbursements from the Food Program of about $500 or $1,000 per year per child.
3) “The Food Program is not worth it because of all the paperwork.”
Look at the Food Program as another job. Are you being paid a reasonable amount for this job? If you served one breakfast, one lunch, and one snack a day to four children and spent three hours a week on Food Program paperwork how much would you be earning per hour? If you received the lower Tier II reimbursement rate you would be earning $13.06 per hour. If you receive the higher Tier I rate you would be earning $27.13 per hour. In addition, much of the paperwork you must do for the Food Program (attendance records, meal counts, etc.) you need to do for tax purposes even if you are not on the program.
Unfortunately, some tax professionals and child care providers are confused about the tax benefits of being on the Food Program. Don’t let anyone tell you it’s not financially worthwhile to be on the Food Program!
I’ve written three handouts that explain the tax benefits of the Food Program in more detail. You may copy them to help educate other child care providers.
Image credit: kernchildcare.org
For more information, see my book Family Child Care Record Keeping Guide.
Tom Copeland, www.tomcopelandblog.com