2020 Tax Changes Affecting Family Child Care Providers
Family child care providers faced many severe challenges in 2020. Here are the major tax changes affecting providers in 2020.
The standard meal allowance rate is $1.33 for breakfast; $2.49 for lunch and suppers; and $.74 for snacks. You can deduct up to one breakfast, one lunch, one supper and three snacks per day, per child.
The standard mileage rate is $.575 per business mile.
The federal government Stimulus checks received in 2020 are not taxable income.
Grants received from your state are taxable income. This is true whether or not you received a Form 1099.
Federal unemployment benefits are taxable as personal income on Form 1040. They are not taxable as business income on Schedule C or any other business tax form.
You can deduct any COVID-10 related expenses such as masks, gloves, sanitizers, and other supplies.
Money received from the Paycheck Protection Program (PPP) or the Economic Injury Disaster Loan program (EIDL) are not taxable income. I strongly urge all providers to apply for the First Draw PPP if they were in business as of February 15, 2020 and made a profit in either 2019 or 2020.
Providers who have employees may be eligible for the Employer Retention Tax Credit. See more from the IRS.
You can deduct up to $300 in charitable contributions on your 2020 Form 1040 even if you use the standard deduction.
If you were closed for weeks or months in 2020, be sure to include all the hours you spent on business activities in your home dealing with COVID-19 when children were not present.
The income eligibility for the Earned Income Credit (EIC) have increased to $47,646 (for married couples, filing jointly with one child), and $41,756 (if single with one child).
The income limits to qualify for the IRS Saver’s Credit has increased to $65,000 (adjusted gross income for couples filing jointly), and $32,500 for individuals or married people filing separately.
Tom Copeland - www.tomcopelandblog.com
Image credit: https://www.picserver.org/photo/9099/Tax.html
For more information on many of these changes, see my Family Child Care Tax Workbook and Organizer.
