As an Educator with Kids at Home you are classified as self employed but its not as scary as it sounds. In fact, it has many benefits. You are responsible for declaring your income to IRD, and for paying your own income tax but you also receive generous tax benefits.
IRD has a worksheet (IR 413) especially for home-based Educators to calculate their taxable income. Kids at Home send you a summary of your hours and gross income at the end of each financial year. Where possible, we also hold a tax evening each year to help you understand and complete your tax return.
The real cool thing about working from your own home is that the IRD give you a concession towards the cost of running your business. This concession varies each year but for 2020 it is $3.70 per child per hour. In simple terms this means you do not get taxed on the first $3.70 per child per hour you earn. This goes straight into your pocket!
So for example:
If one child is enrolled with you for 40 hours and your reimbursement rate is $6 per hour
40hrs x $6 = $240 (Total fee)
40hrs x $3.70 (Your concession from IRD) = $148
$240 (Total fee) – $148 = $92 (Taxable income)
So for one week providing education for one child, you will have recieved $240 but only will only have to pay tax on $92. The $148 goes straight into your pocket. Ching Ching!
If you had 4 children enrolled for 40 hrs your total income is $960 but you will only have to pay tax on $368!
There are other benefits too which will also further reduce your tax obligations but we can go over this in more detail later.