Finishing Our Lower Level, Some Exclusively for Business

[Abigail]

We have spent over $5,000 so far finishing our lower level of our home we just purchased two months ago. We have a contractor working for an hourly fee. We have purchased lots of lumber for adding a wall required by licensing to make sure the furnace area isn't open access to children, and I've spent many hours staining trim, taping/compounding the walls, and painting primer and paint. What can I claim, deduct, or depreciate?

A. The livingroom was mostly done, but we had to install blinds, re-do the window frames, and add a wooden ledge.

B. The rough-in for the fourth bedroom we turned into a daycare kitchen room so we did a lot of work with walls to finish the room and put in a floor and light on the ceiling.......with this project we ended up paying an electrician $500 to rewire the entire lower level because it was not up to code! Is that an expense I can claim, deduct, or depriciate?

C. Finally, the furnace/laundry room has an outside door and it will be the daycare entrance. This is the only room in the entire lower level that is not exclusively used for daycare. We are building a wall to section off the furnace area because licensing doesn't allow kids in a room with access to furnace/water heater/water softener, etc. We are also putting up drywall and the ceiling in this room to complete it for a fantastic daycare entryway with cubbies to be next. What can I claim, deuct, or depriciate?

*Keep in mind it's hourly fees for contractor, electrician fees, building materials, and my time. THANKS A BUNCH!

[daycare]

I dont know the answer to your questions, but I must say that YOU ROCK

I am going to move so I can have my son come to your daycare..

I know its going to be the best your town has to offer..

COngrats to you on all of your hard work....

[Abigail]

Thanks daycare. You're always so nice! The house keeps looking nicer and nicer so I hope I don't get kids who ruin it. LOL. At least the carpet is original from 8 years ago so if we have pee accidents or whatever might happen it will not break my heart. My goal is to expand from 7 kids to 12 come this summer once we build a fence across the back side of the yard. Then if I continue to do well working with hiring an employee and handle the business/professional part of daycare I told my husband I would like to rent a building nearby to get it out of the house if I had employees working WITH me. I say WITH because those who just hire to work with kids are not really doing daycare, they're just doing management. I enjoy working with kids.

[daycare]

Thanks daycare. You're always so nice! The house keeps looking nicer and nicer so I hope I don't get kids who ruin it. LOL. At least the carpet is original from 8 years ago so if we have pee accidents or whatever might happen it will not break my heart. My goal is to expand from 7 kids to 12 come this summer once we build a fence across the back side of the yard. Then if I continue to do well working with hiring an employee and handle the business/professional part of daycare I told my husband I would like to rent a building nearby to get it out of the house if I had employees working WITH me. I say WITH because those who just hire to work with kids are not really doing daycare, they're just doing management. I enjoy working with kids.

well I have a good filter and good radar for good people...in text and in real life..Ok...its not like your my pretend friend or anything...

I am just so super excited to see someone have a dream, grab hold of it, run with it and BOOM look what you have made. You should be so proud of yourself.

I have been doing this for 8 years and I think you know more than I do.... and Im old...hahha

Again, congrats to you. I know you will have your dream. One step at a time..

[TomCopeland]

Deductions

We have spent over $5,000 so far finishing our lower level of our home we just purchased two months ago. We have a contractor working for an hourly fee. We have purchased lots of lumber for adding a wall required by licensing to make sure the furnace area isn't open access to children, and I've spent many hours staining trim, taping/compounding the walls, and painting primer and paint. What can I claim, deduct, or depreciate?

A. The livingroom was mostly done, but we had to install blinds, re-do the window frames, and add a wooden ledge.

B. The rough-in for the fourth bedroom we turned into a daycare kitchen room so we did a lot of work with walls to finish the room and put in a floor and light on the ceiling.......with this project we ended up paying an electrician $500 to rewire the entire lower level because it was not up to code! Is that an expense I can claim, deduct, or depriciate?

C. Finally, the furnace/laundry room has an outside door and it will be the daycare entrance. This is the only room in the entire lower level that is not exclusively used for daycare. We are building a wall to section off the furnace area because licensing doesn't allow kids in a room with access to furnace/water heater/water softener, etc. We are also putting up drywall and the ceiling in this room to complete it for a fantastic daycare entryway with cubbies to be next. What can I claim, deuct, or depriciate?

*Keep in mind it's hourly fees for contractor, electrician fees, building materials, and my time. THANKS A BUNCH!

Lower level - You must depreciate this as a home improvement over 39 years, assuming you will be using this area for your business. If you use it 100% for business you can depreciate 100% of the cost, otherwise use your t/s%.

Living room - Deduct the blinds in one year. Window frames - deduct in one year as a repair. If wooden ledge costs more than $100, depreciate over 39 years. (t/s%)

Bedroom/kitchen - Depreciate over 39 years (t/s% if used for business)

Furnace/laundry room - Depreciate 100% of the cost over 39 years.

[Abigail]

Lower level - You must depreciate this as a home improvement over 39 years, assuming you will be using this area for your business. If you use it 100% for business you can depreciate 100% of the cost, otherwise use your t/s%.

Living room - Deduct the blinds in one year. Window frames - deduct in one year as a repair. If wooden ledge costs more than $100, depreciate over 39 years. (t/s%)

Bedroom/kitchen - Depreciate over 39 years (t/s% if used for business)

Furnace/laundry room - Depreciate 100% of the cost over 39 years.

Why would the time/same percentage be used for the bedroom/kitchen if it is exclusively used for daycare?

So really I just add together all my contractor fees ($3,000 roughly), and the electrician fees ($500) and the cost of all the materials to finish our lower level and depreciate everything 100% over the 39 years as a home improvement since none of it was "replaced" since it's all new?

Then deduct the blinds since they were under $100 each as a home repair?

[TomCopeland]

home improvements

Sorry, I assumed the bedroom/kitchen were also used for personal purposes. If not, depreciate 100% of the cost.

Yes, add the fees together you mention and depreciate as a home improvement.

Yes, deduct the blinds in one year.