Have a Tax Question? Ask a Tax Expert
Hi and welcome to our site!In general - your estimations are correct.Following you might want to consider...You are correct that indirect expenses related to your house are prorated. However - it is likely that you will have direct expenses related to your daycare business. Such expenses are fully deductible.In additional - a half of self-employment tax is deducted against your income tax liability.You might use your car for your business - in this case - transportation expenses are deducted. It might be more simple to use the standard mileage method to track your car expenses.
Beginning on Jan. 1, 2013, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) is 56.5 cents per mile for business miles driven. You might hire other persons to help you - these will be additional expenses.You might need professional services - for instance - you could hire a tax accountant to prepare your tax return. For instance - if you pay for our service - that might be your deductible business expense. You will use your computer for business purposes - and the cost will be deducted according to business use. You will purchase some supply, toys, office supply, etc - that will be additional costs.
You estimated 25% for Federal taxes - but most likely - that will be your marginal tax rate. Part of your income will be taxed in lower tax brackets. The IRS published tax tabled here - http://www.irs.gov/pub/irs-pdf/i1040tt.pdfand you may review Tax Rate Schedules on the last page.Similarly - Maryland's personal income tax rates vary - see for instance here - http://www.bankrate.com/finance/taxes/state-taxes-maryland.aspxSo your actual federal and state income tax liability might be a little less than you estimated.