Depreciation of Home ??

[lilcupcakes09]

As I'm looking back through my last 3 years taxes since starting daycare, I noticed that Part III of my form 8829, the Depreciation of Home part is 0% for all those years. Is this something I'm missing that should have been done or is this correct?

I'm at my largest year $$ wise so I'm trying to make sure I'm not missing anything considering I really don't understand these forms....

[odskids]

Do you own your home or do you rent??

[lilcupcakes09]

I own it

[lilcupcakes09]

And I just found a article written by Tom on google that says I should absolutely be doing it! I'm thinking maybe this was missed last year because the previous 2 years I claimed a loss, 2011 was my actual first "profitable" year and I think my tax preparer missed it.
So my next question, do I go back ans amend last yrs return? Do I have to pay to amend a return?

[lilcupcakes09]

as I'm looking through it looks like it may be listed, but on form 4562 Part III listed as MACRS deductions? It was originally listed as non residential real property my first year of daycare...

This is soooo confusing!!

[Michael]

You always can ask Tom Copeland directly when you join our webinar “2012 Tax Changes: How to Avoid Mistakes on Your Tax Return” Tuesday, February 12th at 8:30-10:00pm Eastern Time. The cost is $25 (100% tax deductible!). To register: http://events.r20.constantcontact.com/register/event?oeidk=a07e6vcrqstfc2c8437&llr=yatrx4cab

[TomCopeland]

Home Depreciation

Yes, you always want to depreciate your home. It represents a large deduction and when you sell your home you will be taxed on the amount you claimed in depreciation or were entitled to claim. So, not claiming depreciation will not save you any taxes.

You aren't entitled to claim any depreciation for years that you show a loss for your business. It sounds like you were not entitled to claim this depreciation until 2011. Tell your tax preparer to amend your 2011 so you can get a refund. Since she should have caught this mistake she shouldn't charge you to amend.

Home depreciation is claimed on Form 8829, part III. In your first year you depreciate your home you should also show this on Form 4562, part III.

[lilcupcakes09]

Thanks Tom! So I wanted to give you what all my tax returns say, so I can get all my ducks in a row before I call my preparer if a mistake was made.

Year 2009: 1st year in business, loss claimed
Form 4562 Part III filled out with home purchase price and depreciated for 39 years as MACRS deduction on line 17, nothing filled out on Form 8829 Part III(which is correct because I claimed a loss?)

Year 2010: I claimed a small profit= $1152.00.
Form 4562 Part III line 17 filled out as MACRS deduction. Nothing listed on form 8829 Part III.

Year 2011: Larger profit claimed this year
Form 4562 Part III line 17 filled out as MACRS deduction, this deduction is 6000 larger than the previous year? Nothing listed on Form 8829 Form III.

So, what should I request to be amended for these years??

Thanks so much for your help Tom!

[TomCopeland]

Thanks Tom! So I wanted to give you what all my tax returns say, so I can get all my ducks in a row before I call my preparer if a mistake was made.

Year 2009: 1st year in business, loss claimed
Form 4562 Part III filled out with home purchase price and depreciated for 39 years as MACRS deduction on line 17, nothing filled out on Form 8829 Part III(which is correct because I claimed a loss?)

Year 2010: I claimed a small profit= $1152.00.
Form 4562 Part III line 17 filled out as MACRS deduction. Nothing listed on form 8829 Part III.

Year 2011: Larger profit claimed this year
Form 4562 Part III line 17 filled out as MACRS deduction, this deduction is 6000 larger than the previous year? Nothing listed on Form 8829 Form III.

So, what should I request to be amended for these years??

Thanks so much for your help Tom!

2009 is correct. You aren't allowed to claim any depreciation because you had a loss.
2010 - If line 17 shows your home depreciation then you don't need to amend. It should have been claimed on Form 8829, but the results are the same if claimed on 4562. And you are allowed to claim this depreciation up to your profit amount.
2011 - Again, it sounds like your home depreciation was claimed on Form 4562. Check to be sure this is true. Don't know why it's $6,000 more. Ask what this is.

[TheGoodLife]

Lost!!!

:confused: So I've been reading Tom's tax books (2012 Tax Organizer and Record Keeping books). Now looking through these posts I'm confused. I started my DC in August and my income is small (I only had 1 FT, 2 PTs, and 2 Drop Ins for 2012). I'm assuming I'll probably be at a loss after taking out deductions for food, supplies, furniture, ect. Do I need to go through a do a depreciation record of ALL things in my house (from furniture to dishes) or is it a waste of time? It looks like, if I'm reading this all correctly, that I can't claim these depreciations if I report a loss... which I should be for my first year? So do I still need to have these depreciations if I can't claim them? TIA... my head is spinning!!!

[TomCopeland]

Depreciation

:confused: So I've been reading Tom's tax books (2012 Tax Organizer and Record Keeping books). Now looking through these posts I'm confused. I started my DC in August and my income is small (I only had 1 FT, 2 PTs, and 2 Drop Ins for 2012). I'm assuming I'll probably be at a loss after taking out deductions for food, supplies, furniture, ect. Do I need to go through a do a depreciation record of ALL things in my house (from furniture to dishes) or is it a waste of time? It looks like, if I'm reading this all correctly, that I can't claim these depreciations if I report a loss... which I should be for my first year? So do I still need to have these depreciations if I can't claim them? TIA... my head is spinning!!!

No head spinning. It will freak the kids.

You always want to do an inventory of the items you owned in your home before you went into business, that you later use in your business. In your case, this will create (or increase) a loss. When you enter your loss on Form 1040 it will reduce other income (spouse's) and reduce your taxes. If you show a loss just counting your expenses from Schedule C, you can't claim any house expenses from Form 8829 (including house depreciation). In this case, you would roll over these house expenses onto your 2013 tax return and claim them next year.

[TheGoodLife]

No head spinning. It will freak the kids.

You always want to do an inventory of the items you owned in your home before you went into business, that you later use in your business. In your case, this will create (or increase) a loss. When you enter your loss on Form 1040 it will reduce other income (spouse's) and reduce your taxes. If you show a loss just counting your expenses from Schedule C, you can't claim any house expenses from Form 8829 (including house depreciation). In this case, you would roll over these house expenses onto your 2013 tax return and claim them next year.

I hope this isn't a stupid question, Tom, but will this be pretty self-explanatory when I go to do my taxes if I'm following your tax book? Right now I'm just in my organizing mode, so it is all a second language to me since I haven't actually sat down to look at the tax forms yet. I'm not one to spend money frivolously, and have always done my/our taxes, and I'm hoping to this year... but I don't want to do it wrong and miss money or worse get audited!
Thanks so much for all your advice and help- you are wonderful!!! :hug:

[TomCopeland]

Question

I hope this isn't a stupid question, Tom, but will this be pretty self-explanatory when I go to do my taxes if I'm following your tax book? Right now I'm just in my organizing mode, so it is all a second language to me since I haven't actually sat down to look at the tax forms yet. I'm not one to spend money frivolously, and have always done my/our taxes, and I'm hoping to this year... but I don't want to do it wrong and miss money or worse get audited!
Thanks so much for all your advice and help- you are wonderful!!! :hug:

Your job is to round up all your receipts and other records to show your income and expenses. A tax professional should know how and where to put this on your tax forms. If you follow my book it should be straight forward. If not, let me know.

[TheGoodLife]

Your job is to round up all your receipts and other records to show your income and expenses. A tax professional should know how and where to put this on your tax forms. If you follow my book it should be straight forward. If not, let me know.

I want to try to do it myself instead of going to someone- I feel more confident as I spent most of yesterday reading and highlighting- so hopefully I will be ready to do my own filing. I also found someone from your website;s recommended accountant list who will do a second glance at it, just in case I do make a mistake or miss something- a lot cheaper than having someone do it completely. Thanks again