Ya ... incomes in the 40% tax bracket are for people earning Millions of dollars a year so you've got no worry of that in THIS industry

Home childcare provider, after the basic personal tax exemption Playfelt mentioned, are likely to be taxed in the 15% - 21% tax bracket depending on what your charge, if you are full all year and what your expenses for your program are ... so if you are setting aside 15% of your GROSS or before expenses revenue each week that should cover your taxes, your vacation time AND have left over of your rainy day fund!

This is what I do for my budgeting ... so based on my fees 15% to go into savings each week is $130 a week when I am full which I have been basically since I opened so at the end of the year that leaves me in average $6760 in my business savings account ... I can take out $1740 annually if needed when I take vacation as my 'vacation pay' to pay any bills and that leaves me $5020 still. Than if I need I have $1740 available if I am take the full 10 days of personal time I budget for. That leaves me still $3280 is left for tax purposes in that account ... I have never paid over $1000 for taxes ... so each year I have been able to 'save' in the business account at least $2000 and to be honest most years I do not need to take my full vacation pay or personal days out of my savings because I am able to just cut back on expenses and stuff those week to adjust for any loss in income .... this accumulates for time when ratio is low, if I were to get truly sick or as my 'retirement savings'.

Basically my business budget in a nut shell looks like this
1 kids weekly fees covers 'daycare food / consumable supplies'
1 kids weekly fees covers 'business taxes/vacation/sick time/business savings'
2 kids weekly fees covers 'my portion of household expenses ~ aka my income'
1 kids weekly fees covers discretionary spending for things in the business (new toys, replacement equipment, renovations and upkeep of the house, field trips, and so forth all those things that are above and beyond the basics that can be temporarily cut back with little over all affect on the program should financial need be .... this is the space I do not NEED to be full all the time that allows me to be flexible in choosing the perfect match verses feeling desperate!