April 11, 2026

How to Calculate Your Real Hourly Rate as a Daycare Owner

When someone asks what you make, the number that comes to mind is usually the tuition you charge. But that's gross income. Your real hourly rate — the amount you actually take home per hour of work — is almost always lower than you think. Here's how to figure it out.

The formula

Your real hourly rate is:

Each of those four numbers matters. Let's break them down.

Total income

This includes everything — tuition from parents, CCAP payments, CACFP reimbursements, and any other income related to your daycare. If a parent pays you in cash, that counts too. Use your actual collected income, not what you're owed. DaycareProfit tracks every payment by source, so your total income number is always accurate and up to date — no adding things up manually.

Total expenses

Food, supplies, toys, cleaning products, the business-use portion of your rent or mortgage, utilities, insurance, mileage — all of your daycare-related costs. Most home daycare providers spend 30% to 50% of their gross income on expenses, but the exact number depends on how many kids you care for, whether you own or rent, and what your area costs. If you're not tracking every expense, you don't actually know this number — you're guessing. DaycareProfit keeps a running total categorized by type, so you see your real expenses at a glance.

Taxes

This is the part most providers forget. As a self-employed sole proprietor, you owe self-employment tax of 15.3% on your net profit (that's 12.4% for Social Security and 2.9% for Medicare). On top of that, you owe federal income tax based on your bracket, and state income tax if your state has one.

A rough estimate: plan to set aside 25% to 35% of your net profit for combined federal, state, and self-employment taxes. The deduction for the employer-equivalent half of your SE tax helps, but you're still looking at a significant amount.

Total hours worked

This is where the math gets honest. Your hours aren't just the time children are in your home. Count the time you spend on:

• Setup and cleanup before and after care hours
• Meal planning and grocery shopping
• Bookkeeping and expense tracking (DaycareProfit cuts this to minutes per week)
• Communicating with parents
• Training and continuing education
• Cleaning and sanitizing after kids leave

Most providers who only count “care hours” are underestimating their true work time by 10 to 15 hours per week. That difference has a big impact on your hourly rate.

A real example

Say you care for 6 kids and collect $4,800 per month in tuition. Your monthly expenses (food, supplies, portion of rent, utilities, etc.) total $1,600. After self-employment tax and income tax, you keep roughly $2,100 per month. You work about 55 hours per week counting all the prep and admin time.

That's a real number, and it's lower than what most providers expect. It doesn't mean you're doing something wrong — it means most people don't run this math. Once you see the real number, you can start making changes: raising rates, cutting unnecessary expenses, or claiming deductions you've been missing. The first step is knowing the number — and DaycareProfit calculates it for you automatically every time you log in.

What you can do about it

The biggest lever most providers have is deductions. Every deduction you claim reduces your taxable income, which means you keep more of what you earn. Our daycare profit calculator lets you plug in your actual numbers and see your real take-home instantly. And for a full list of money-saving strategies, read our home daycare business tips.

DaycareProfit shows your real profit number on your dashboard every time you log in — updated automatically as you log income and expenses. You don't have to run this formula yourself. The app tracks what you're actually earning, spending, and keeping so you can make smarter decisions about your rates, your expenses, and your deductions throughout the year — not just at tax time.