If you earn income from providing childcare out of your own home, you may need to pay tax on it and complete an end of year individual income tax return – IR3.
This depends on:
- whether you use standard costs or actual costs to work out your expenses
- how much you earn after you’ve claimed standard costs or actual costs
- whether you earn other income that has not had tax deducted (for example, self-employed income).
You can choose to use either standard costs or actual costs in an income year, but not both.
Standard costs are based on the average costs for providing childcare. You can use them if you are not GST-registered.
If you use standard costs, you:
- do not need to keep track of your actual expenses
- cannot claim any losses.
If the payments you receive for childcare are less than the standard costs calculated for your home-based childcare, then you do not need to file an IR3 return. (Unless you also received other untaxed income.)
Use our IR413 worksheet to see if you need to file a return.
Alternatively, you can claim actual expenses and costs in providing childcare against the income you receive.
If you use this method, you need to:
- keep a record of all household and childcare service related expenses
- record the proportion of household expenses that relate to childcare
- file an individual income tax return – IR3.
If you are GST-registered, you must use the actual costs method.
You also must use actual costs if you provide private childcare in your own home and you are not part of a licensed service provider network. For more information, see our Determination DET 09/02.
You can find out more about license standards for home-based childcare on the Ministry of Education website.