Members of the Maryland Association of Certified Public...

Tax questions

March 28, 1997

Members of the Maryland Association of Certified Public Accountants are answering readers' tax questions through April 15.

Q: What is the maximum amount you can deduct from your taxable income for child-care expenses?

A: For federal income tax: A credit vs. a deduction is available for qualifying child- or dependent-care expenses. To calculate your federal tax credit you must file Form 2441, Child and Dependent Care Expenses, with your Form 1040 or Form 1040A Schedule 2. The maximum amount of expenses to which the credit may be applied is $2,400 if one qualifying child or dependent is involved or $4,800 if two or more are involved, less excludable employer dependent-care assistance program payments. The credit is equal to 30 percent of expenses for taxpayers with adjusted gross income of $10,000 or less. For taxpayers with adjusted gross income over $10,000, the credit is reduced by 1 percentage point for each $2,000 of adjusted gross income (or fraction thereof) over $10,000. For taxpayers with AGIs of over $28,000, the credit is 20 percent.

For Maryland income tax: A subtraction is allowed for the qualified child-care expenses described above. The subtraction replaces the federal credit, however, the limits for deductible expenses are the same, $2,400 for one child, $4,800 for two or more children. You must file Maryland Form 502 to take advantage of the subtraction. Report the subtraction on Line 24 of the Form 502.

The above advice is for general purposes only and is not intended as legal, accounting or tax advice. Specific situations may vary.

To ask a tax question, call Sundial at 410-783-1800. Call 268-7736 in Anne Arundel County, 836-5028 in Harford County and 848-0338 in Carroll County. Using a Touch-Tone phone, punch in the four-digit code 6225 after you hear the greeting.

Readers also can e-mail questions through The Sun's Web site --

Selected questions will be answered in the Business section. No questions will be answered by phone.

Pub Date: 3/28/97

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