Getting the Most Out of the Food Program on Your Taxes

As a family child care provider, participating in the Child and Adult Care Food Program (CACFP) can be a financial lifeline. Not only does it help ensure that the children in your care receive nutritious meals and snacks, but it also provides valuable reimbursements that can boost your bottom line. However, navigating the tax implications of the Food Program can be tricky. In this article, we'll explore how to maximize your food expense deductions and get the most out of the Food Program on your taxes.

First and foremost, it's crucial to understand that you must report the reimbursements you receive from the Food Program as income on your Schedule C (if you're a sole proprietor). This may seem counterintuitive, as the money is essentially a reimbursement for your expenses, but it's a necessary step to ensure you're in compliance with tax laws.

Now, let's talk about deductions. If you use the standard meal allowance rate to claim food expenses, you can deduct up to one breakfast, one lunch, one supper, and three snacks per day, per child, if you serve that many. The standard meal allowance rates for the 2024 tax year are:

• Breakfast: $1.65

• Lunch and Supper: $3.12

• Snack: $0.93

It's important to note that you should always use the Tier I rates as of January of each year, not the rates that come out in July.

If you don't use the standard meal allowance rate, you can estimate the actual cost of the food served to the children. To do this, you must save both your business and personal food receipts. This allows you to prove that the business receipts are truly for the children's food and not consumed by your own family. You can estimate the average cost per meal, per child, or calculate the percentage of the total cost of food that is served to the children.

But what about those extra meals and snacks that aren't reimbursed by the Food Program? Can you still deduct them? Absolutely! Even if your Food Program only reimburses you for two meals and one snack, you can deduct up to the full daily allowance if you serve that many. And here's a bonus: non-reimbursed meals don't need to follow CACFP guidelines to be deductible.

If you have staff members who eat the meals you prepare for the children, you can claim those meals as well. Either apply the standard meal allowance method or save food receipts and deduct the actual cost of the food.

Now, let's address a common misconception. Some providers have been told that they don't need to claim Food Program reimbursements as income if they don't claim the expenses on their taxes. Unfortunately, this advice is incorrect. The Child Care Provider Audit Technique Guide clearly states that you should report the reimbursements as income.

In summary, participating in the Food Program and accurately reporting your income and expenses on your taxes can be a significant financial boost for your family child care business. By understanding the rules, keeping meticulous records, and maximizing your deductions, you can ensure that you're getting the most out of this valuable program. And remember, if you ever have doubts or questions, consult with a tax professional who specializes in family child care to ensure you're on the right track.