More Frequently Asked Questions...

I want to sell my home but have been doing child care in it for 8 years and have used all the deductions allowed. How will this affect me tax wise when I sell?

Assuming that you are self employed and file a Schedule C with your annual tax returns, you will also need to file Form 8829 to claim business use of your home. On this form, there is a line to claim depreciation on your home. Now, since you have used part of your home for business, you will need to adjust the cost basis of your home to account for this depreciation.

This can get fairly detailed but in general, the price you pay to purchase your home is your original cost basis. Certain changes that you make to your home which improve its value will increase your cost basis. Operating a home business, will reduce your cost basis. The depreciation claimed on most homes is minimal and should not have a detrimental affect on your taxes.

I am always in the care with my daycare children. I pick them up in the morning., drive them on field trips, and bring them home at night. Can I write off the cost of my car payment, gas, oil changes and receive a mileage allowance?

The miles that you drive which are directly related to the operation of your daycare OR the actual expenses required to maintain this automobile can be deducted from your income at tax time. But yo have to choose one method and can not combine pieces of each.

The IRS Adjusted Mileage Allowance is one method to consider. With a written mileage log, you can deduct 31 cents for each mile traveled exclusively related to your daycare business. Please note that from January 1 through March 31, 1999 you could deduct 32.5 cents per mile and from April 1 through December 31, 1999, 31 cents is utilized. Your mileage log must be written and must include beginning odometer reading January 1 and ending reading on December 31 annual. Each trip in between must include beginning odometer, starting location, ending location, purpose of the trip, total miles driven and ending odometer reading.

The other method to consider is the Actual Expense Deduction which allows you to claim gasoline, oil, repairs, license, auto insurance, registration, and depreciation as an expense. You will still need to record mileage to use this deduction and have to track business miles and personal miles in order to determine a percent of the expense which you can claim as a deduction.

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