child care providers tax deductions
Family Child Care
Hi! I've created these child care tax help pages to help child care providers with their income tax deductions and tax returns. So many providers, especially new ones, ask me and others how to go about doing their daycare taxes. When I began my family child care business back in 1991, tax accounting really confused me. I'm hoping that with the knowledge I have now I can help others set up a tax filing system that won't overwhelm them.
Please let me start by saying that I'm NOT an expert in daycare tax preparation. That being said, I cannot guarantee that everything on these pages are absolutely correct. Tax laws change. People give wrong information. And so on. If you know of anything here that is not correct, please send me an email and let me know about it. Likewise, if you'd like to add something to what I have here, I'd also like to know about it.
Let's begin. You need to choose some sort of daycare accounting method. It really doesn't matter which way you choose as long as you are consistent and thorough. You have 2 choices. You can do your accounting the old-fashioned way by hand or you can purchase and use a software program. I've listed some of them below. I use the print version of Calendar-Keeper and do mine by hand with this workbook and a pen and pencil. You can purchase Calendar Keeper inexpensively through Redleaf Press or order below with Amazon. Calendar Keeper is a 12-month calendar and record keeper. It is all inclusive. you can use it to keep track of your actual daycare hours, extra hours, mileage, and all expenses incurred. The name of what you are looking for is: "Redleaf Calendar-Keeper 2017: A Record-Keeping System for Family Child Care Providers."
it's time to talk about how you go about keeping track of your actual records. Click on the "5 Steps" Link below to get started!
child care providers tax deductions
Maryland provides two separate tax benefits for child or dependent care costs: a subtraction that reduces your taxable income and a tax credit that reduces the amount of tax you owe.
The state subtraction benefit, which is claimed on Form 502, reduces your taxable income. If you have eligible child or dependent care expenses, first determine your federal tax credit by completing the calculation on federal Form 2441. Transfer the amount of child or dependent care expenses (not the federal tax credit) claimed on line 6 of the federal form to line 9 of Maryland Form 502. You can subtract actual expenses up to the legal maximums of $3,000 for one child or $6,000 for two or more children.
The tax credit, which is claimed on Form 502CR, reduces the amount of tax you owe. If you were eligible for a child and dependent care credit on your federal income tax return, you may be entitled to a tax credit on your Maryland income tax return.
The tax credit does not affect the treatment or eligibility of the state tax subtraction for child care costs.
For more information about the tax credit, see Child and Dependent Care Tax Credit
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