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09/07/2012

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Taimi

Do I have to be licensed to get all the deductions you are talking about?
Thank you

Tom

If you are exempt from your state child care licensing rules you can deduct the same expenses as if you were licensed.

Silvia Paredes

My tax preparer told me that he can not depreciate all my kitchen inventory. He told me that is not sense how can depreciate the use of a spoon.
Is that correct?
Thank you.

Tom

You are entitled to depreciate all property you owned before your business began and then start using in your business. Yes, it doesn't make sense to depreciate one spoon. It does make sense to depreciate hundreds of items. The IRS Child Care Provider Audit Technique Guide makes this clear.

Brandy

we are looking into buying a new 12 passenger van specifically for my rf child care, what write offs would I have? Is it only mileage?

Tom

You can either use the standard mileage rate or the actual expenses method to claim car expenses. If you use the standard mileage method you can deduct $.56 a mile for 2014, parking, tolls, and the business portion of car loan interest and annual property tax. If you use the actual expenses method you can deduct the business portion of all actual expenses - gas, oil, repairs, insurance, parking, tolls, car loan interest, property tax, and depreciation on the car.

Jannah

Is insurance tax detactable

Tom

See this article about insurance: http://www.tomcopelandblog.com/2013/11/is-insurance-deductible.html

Denise Noble

I took 7 weeks off in the summer.I cleaned and organized my daycare things,painted our school room and all the shelves.I kept track of all the hours I worked but tax man says I can't claim that time because I didn't have children.Is this true?

Tom

Your tax man is dead wrong. You can count these hours. Tell him to look at the IRS Audit Guide on family child care: http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Child-Care-Provider-Audit-Technique-Guide
Being able to count these hours is a big deal. If your tax preparer won't allow you to count them, find another tax preparer.

Cynthia Curtis

I have had my childcare business for 23 years and I don't think my taxman has ever depreciated our house or anything in it. You wrote something about an upcoming newsletter about depreciating lost years. My new taxman says I can only go back 3 years.

Tom

You can use IRS Form 3115 to go back 23 years to recapture previously unclaimed depreciation on your home! This is an exception to the general rule of only being able to amend your tax return back 3 years. So, you want your tax person to file this form on your behalf and get all the past home depreciation on your 2014 tax return. Call me if you need help with this: 651-280-5991. Don't let him file your taxes without using Form 3115.

Rowena Quevedo

Every year I end up paying about $5,000 in self employment taxes. My financial planner suggested to change my business structure from an LLC to LLC filing as a S Corp. If I do that, what deductions will be cancelled and what deductions I can continue? Can you pls give me a list of those? Thank you.

Rowena Quevedo

Hi Tom,

Sorry I made a mistake on my last entry regarding changing my business structure. I meant to change my business structure from a Sole Proprietorship to an LLC filing as an S Corp. Thank you!

Brad Ogles

We live in Iowa and we are being Audited by the State IRS. They are saying that we cannot deduct the home office expenses due to we are not registered with the State. But I have read that since we only care for 5 children, then we are not required to be registered and should still be able to write off these items. Which is correct and where can I find something in writing to take to the IRS to plead my case?

Thanks,

Tom

The auditor is dead wrong. See IRS Publication 587: "You must have applied for, been granted, or be ex-
empt from having, a license, certification, registration,
or approval as a daycare center or as a family or
group daycare home under state law. You do not meet
this requirement if your application was rejected or
your license or other authorization was revoked." So, since you are exempt from state licensing rules you can claim home office expenses. This is also repeated in the IRS Child Care Audit Technique Guide: http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Child-Care-Provider-Audit-Technique-Guide

Heather

I have not got my license to open my child card yet. We want to need to make improvements to the basement. To claim the items need for the improvement, do I have to be licensed first?

Tom

No. If you make the improvement before you start caring for children, add the cost of the improvement to the value of the home when you depreciate the home. If you make the improvement after you start caring for children, depreciate the home improvement separately from the home.

Vicki Miller

I have a home childcare business. We had a company install new carpeting last year. My husband installed new baseboard molding himself before the carpet was laid. We bought the wood baseboard and also a miter saw, putty, etc. in order to do the job. Are the miter saw, putty, etc. needed to complete the project deductible?
Also, for two months of last year I was open for business, but my babies had reached the age to move on and I was in process of finding new little ones. Can I count those 2 months for my business? Vicki

Tom

You can use the 50% bonus depreciation rule on the carpet and baseboard costs, including the saw and putty. You can still count the hours you spent on business activities in your home for the two months you were looking for new babies.

Pam

Can you keep track of how many loads of laundry you do for daycare? Or how do you keep track of that for a deduction?

Tom

You can deduct the time-space % of the cost of the washer/dryer and detergent, etc. You can count the hours spent rounding up the items to put in the washer and then storing them away after taking them out of the dryer. If you believe you are using the washer/dryer more than your time-space %, then track the number of business loads versus total loads, and use that % for the costs.

Lstrebig

We had our house resided last year.. (We have taken out a loan). Can this be used as a deduction for day care?

Tom

You can depreciate the house siding over 39 years as a home improvement. Multiply the cost by your time-space % and depreciate over 39 years. Deduct the time-space % of the loan interest each year.

Derek

My wife, a full time child care provider, traveled to another city and took an intensive course in a special type of yoga which she now uses with her daycare toddlers (for exercise, play, and social interaction). She became certified in this yoga and has also taught it in group meetings of other child care providers as well as elementary school teachers. Can we deduct the expenses she incurred for the travel and courses she took to learn how to do this?

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