Are CACFP reimbursements taxable for home daycare providers?

The IRS rule in one sentence

IRS Publication 587 says reimbursements you receive from a sponsor under the USDA Child and Adult Care Food Program (CACFP) are taxable only to the extent they exceed your expenses for food for eligible children. If reimbursements are more than those food expenses, you show the difference as income in Part I of Schedule C.

In other words, CACFP money is not automatically income, and it is not automatically tax-free. It depends on how it compares with what you spent feeding eligible daycare children. Pub. 587 says not to include CACFP payments or food expenses for your own children, even if they are eligible for the program. Follow the same procedure even if your sponsor sends you a Form 1099-MISC.

Rules shown are from the 2025 editions of Pub. 587 and the Schedule C instructions; verify for 2026 when the new editions post.

If you deduct actual food costs

If you deduct the actual cost of food, compare your CACFP reimbursements for the year with your food costs for eligible children:

• Food costs are higher than reimbursements: the Schedule C instructions say to deduct only the cost of food that exceeds the reimbursement (Pub. 587: show it in Part V of Schedule C).
• Reimbursements are higher than food costs: report the excess as income in Part I of Schedule C (per Pub. 587).

Pub. 587 also says that if you deduct actual food costs, keep a separate record, with receipts, of your family's food costs so business and household groceries stay apart.

If you use the standard meal and snack rates

Family daycare providers can use the IRS standard meal and snack rates instead of actual costs to figure the deductible cost of meals and snacks for eligible children. The rates are the CACFP tier I reimbursement rates in effect on December 31 of the prior year. See our standard meal rates guide for the current figures and how to log meals.

The Schedule C instructions apply the same principle here: if you receive reimbursement under a USDA food program, only deduct the cost of food that exceeds reimbursement, if any. In practice, many providers figure the standard-rate amount for the year, compare it with their CACFP reimbursements, and treat any difference according to the rule above. Pub. 587 does not show a separate worksheet for this comparison, so confirm your exact method with your tax preparer.

Where it goes on your return

• Excess reimbursement: Schedule C, Part I (income).
• Food costs above reimbursement: Pub. 587 says to show the difference as an expense in Part V (Other expenses) of Schedule C.

If you are new to the form, our Schedule C vs. Form 8829 guide shows which items go where.

Records to keep

• Every CACFP reimbursement statement from your sponsor, with dates and amounts.
• A daily meal and snack log for each eligible child (name, dates, which meals). Pub. 587 includes a sample log in Exhibit A.
• Food receipts, separated from household groceries, if you use actual costs.

Our CACFP guide covers how the program works, and our audit records guide covers how long to keep these papers.

Frequently asked questions

Are CACFP reimbursements taxable income for home daycare providers?

Only to the extent they exceed your expenses for food for eligible children, according to IRS Publication 587. Any excess is reported as income in Part I of Schedule C.

Can I use the standard meal rates if I get CACFP reimbursements?

Yes. Family daycare providers can use the standard meal and snack rates instead of actual costs. The Schedule C instructions say that if you receive USDA food program reimbursement, only deduct the cost of food that exceeds the reimbursement, if any.

Do I need receipts if I use the standard meal rates?

The standard rates replace food receipts for the meals you claim, but you still need records such as a meal and snack log for each eligible child. Pub. 587 includes a sample log.

Do meals for my own children count?

No. Pub. 587 says not to include CACFP payments or food expenses for your own children, even if they are eligible for the program. Only meals for eligible daycare children count.