Maryland Expands Child and Dependent Care Tax Credit

On May 13, 2019, Governor Hogan signed a bill to expand Maryland’s Child and Dependent Care Tax Credit. Taxpayers who have expenses for child and dependent care to allow them to work can claim a credit for these expenses on their federal tax return. Maryland has long allowed an income tax credit that was a percentage of the federal credit; however, the credit was limited to those with relatively low income –$50,000 federal adjusted gross income (AGI) or less. The new bill expands the reach of the credit in 3 ways:

  • The credit is now available to taxpayers at higher income levels – individuals with federal AGI of $92,000 or less and married couples filing a joint return with federal AGI of $143,000 or less.
    • The state credit starts at 32% of the federal credit and is reduced for taxpayers with federal AGI over $30,000 (individuals) or $50,000 (married filing joint return). Taxpayers who fall into this “phaseout” range will be eligible for a credit of between 1% and 31% of the federal credit, depending on their income level.
  • If the amount of the credit exceeds a taxpayer’s state income tax, the taxpayer may be able to get a refund of the excess. This applies to taxpayers whose federal AGI does not exceed a certain level: $50,000 for individuals and $75,000 for married couples filing a joint return.
  • The income thresholds above will be indexed for inflation.

The new bill will apply to 2019 tax returns.

Maryland also allows a subtraction modification for child and dependent care expenses, which is allowed in addition to the credit and is not affected by these changes.

For more information about this or other tax-saving ideas, please contact reach out to us at info@hertzbach.com or 800.899.3633.

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