Should Nannies Become Family Child Care Providers?

Can you make more money as a nanny or a family child care provider? Are there other considerations besides money that favor one job over the other?

A nanny cares for children in the home of the parents and is the employee of the parents. Family child care providers own their own business and almost always care for children in their own home.

There are pluses and minuses for each job and it’s an individual decision as to which one will be more rewarding for you.

There are many reasons why a nanny may consider opening up a family child care business:

* You want to be your own boss

* You want to care for your own child in your own home

* You think you can make more money

* You want to care for more children

As a nanny, you follow the instructions of the child’s parents. As a family child care provider, you make all the decisions and assume all the responsibilities. That means potentially more work, but also more rewards.

Family child care providers have the potential to earn more money than a nanny. That’s because a provider can care for more children and set their own rates (and raise them whenever they want).

Each state has its own rules about how many children (and of what ages) they can care for. They must also follow their state’s child care licensing rules regarding background checks, health/safety regulations, ongoing training and more. Contact your local child care regulatory agency for more information.

Family child care providers also can receive support from a variety of organizations and networks, including family child care associations, Child Care Resource and Referral agencies, and child care unions.

Tax Considerations

There are also significant tax considerations that favor family child care providers over nannies.

Everyone’s situation will vary.

As a nanny, you are an employee and report your income on IRS Form 1040 as wages. The family should be withholding Social Security/Medicare taxes as well as state and federal income taxes. They also pay half of your Social Security/Medicare tax. You can’t deduct any expenses you might have (mileage to work, supplies, toys, etc.).

Family child care provider can deduct hundreds of house-related expenses as well as mileage, food, supplies, and so on. The biggest tax break a provider receives is the ability to deduct a portion of their house expenses (property tax, mortgage interest, house insurance, house repairs, utilities, and house depreciation). These are expenses that a provider is already paying for, but now becomes a business deduction. In the example, this tax break allows the provider to reduce their taxable income by $5,000.

Under a new tax law, providers can also reduce their federal taxable income by 20% of their profit (or family taxable income, whichever is lower). In the example, this saves the provider another $1,000 in taxable income.

On the other hand, providers will have additional expenses, such as higher Social Security/Medicare taxes and food expenses. In addition, there may be expenses for license fees, toys or supplies, and other equipment to meet licensing regulations, annual training requirements, memberships in professional organizations, business liability insurance, any modifications on your home to meet licensing requirements, and so on.

As a nanny, you know how much you will earn and there is no record keeping to speak of. As a family child care provider, your income will depend on how many families you can attract to your program and how well you can manage the business side of things.

It’s your decision

Some people are better suited to be a nanny, some as a family child care provider. Before making this decision, talk with family child care providers in your community. Reach out to local family child care associations, Child Care Resource and Referral agencies who can help you assess your fit to open an in-home program.

Good luck in whatever you decide to do!

Were you a nanny before becoming a family child care provider? Are you a provider thinking about becoming a nanny? What is your experience?

Tom Copeland - www.tomcopelandblog.com

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