"Home Office" Deduction

[jbragg10]

My wife runs a daycare from her home. She does not use any rooms "exclusively" for the daycare, but she does use EVERY room "regularly".

Does she qualify for a home office deduction?

Just curious on my taxes (from turbo tax) if I need to list her business as having a "Home Office".

Thanks for the help!

[jbragg10]

The reason is (on turbo tax) ...

If I don't check that she uses the space "exclusively", it will not let me do the home office deduction (in the business profile).

Then, if I go to "Home Office Expenses" ... it won't let me fill anything out because it says I don't have a home office.

If it won't let me fill out the home office in my business profile, how can I list my business expenses?

[jbragg10]

Just got off the phone with Turbo Tax.

They said it does qualify because there is an exception for daycares.
So I filled out my stuff for the "Home Office"

And in the boxes, since I had two locations .. they told me to put
50% for location A
50% for location B

Hours used in daycare:
Location A - 1175 out of 4392 (3100 sq ft) = 26.75%
Location B - 1375 out of 4392 (1800 sq ft) = 31.31%



Does this sound right?

[MyAngels]

You need to be very careful using tax prep software if you are claiming daycare expenses. It is incredibly easy to make major mistakes if you are not very familiar with the various forms and why and how they are used.

It's very worth the extra money to use a tax preparer/accountant who is familiar with this business.

[jbragg10]

I have done this for a couple of years now. I have all paperwork and understand it pretty well. The only thing that messed me up a little bit was the fact that we moved half way through the year.

This caused me to have 2 offices ... one was used 50% of the time and the other was used for 50% of the time

[MarinaVanessa]

I second the previous (by MyAngel) post. Also be careful who you ask, make sure that it's a reputable source that your information is coming from as in a tax accountant that specializes in home DC. Home daycare changes the way that you do taxes.

I personally don't know the answer to your question however I have never claimed the home office deduction for my DC in all the years that i've done this. I figure out my time/space% and deduct that % from all of my expenses.

Tom Copeland is a good person to ask. He specialized in this. You can also purchase his Family Child Care Record Keeping Book which helps out with a lot of this stuff also. I've never read anything about a home office deduction in any of his books. I hope he can chime in for you and we can all learn the answer to this question

[MyAngels]

I have done this for a couple of years now. I have all paperwork and understand it pretty well. The only thing that messed me up a little bit was the fact that we moved half way through the year.

This caused me to have 2 offices ... one was used 50% of the time and the other was used for 50% of the time

Ah, I see....that is tricky. I'm sure Tom will chime in with the correct answer .

[jbragg10]

I second the previous (by MyAngel) post. Also be careful who you ask, make sure that it's a reputable source that your information is coming from as in a tax accountant that specializes in home DC. Home daycare changes the way that you do taxes.

I personally don't know the answer to your question however I have never claimed the home office deduction for my DC in all the years that i've done this. I figure out my time/space% and deduct that % from all of my expenses.

Tom Copeland is a good person to ask. He specialized in this. You can also purchase his Family Child Care Record Keeping Book which helps out with a lot of this stuff also. I've never read anything about a home office deduction in any of his books. I hope he can chime in for you and we can all learn the answer to this question

The thing is ... with Turbo Tax, you have to check in your business profile that you have a home office in order to fill out your home office expenses (square footage of house and hours you performed). If you don't ... it will not allow you to move on to that section.

TurboTax representatives said that you check the home office because it is a daycare and falls under one of the following conditions ..

"A home office can be an entire room, a part of a room (such as an area filled by a desk, chair, and filing cabinet), and/or other space that meets at least one of the following conditions:
- The space is used exclusively and regularly for your business.
It must be either:
- Your principal place of business; or
- The place where you meet with clients, customers, or patients; or
- A separate structure not attached to your house or residence (such as a shed) you use in connection with your trade or business
· The space is used regularly to store inventory or product samples; or
· The space is used regularly as a daycare center

[jbragg10]

To build on that above (for Tom) ...

1. It says on the next page:
Does Jackie use part of this home exclusively for this business or does it meet one of these exceptions?

^ when you click exceptions, it states:
If you use part of your home for daycare

2. Then ... it goes on to ask if it is the principal place for business and normal part of business (which is yes)

3. Then it says ...
Good News! Jackie qualifies for the second home office deduction.
Now we can help you save money by deducting part of your household costs and specific home office expenses.

4. Then asks
Business Conducted in Home Office
Daycare
Enter the percentage of time Jackie spends conducting business in the home offices.

[TomCopeland]

Turbo Tax and home office

Family child care does qualify as a home office. When you do your business out of two homes in one year you must calculate your time-space % for each home.

Your numbers are correct, assuming you moved into the second home on July 1st. If not, let me know when you left the first home and when you began doing child care in the second home.

Join me for a 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.co...&llr=yatrx4cab

[jbragg10]

Family child care does qualify as a home office. When you do your business out of two homes in one year you must calculate your time-space % for each home.

Your numbers are correct, assuming you moved into the second home on July 1st. If not, let me know when you left the first home and when you began doing child care in the second home.

Join me for a 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.co...&llr=yatrx4cab

A little off on my part.

We stopped daycare on Friday, May 18
We started at new house on Monday, May 21

One other question ... I am getting 1 error on my return

Schedule C (Daycare) -- Form 8829 (405 Cherry Point Dr) -- Form 8829 Worksheet: Allocable home office expenses from both copies of the Form 8829 worksheet, when added together, must equal Schedule C, line 28 total expenses of $1919.00.

^ Not sure what to do about that.

[jbragg10]

^ since the percentages are different, I am guessing I take the total of 1919 and allocate to the percentage of that home?

So if I used 45% at Brookgreen, I would take 1919 times 45% to give me line #7

and 55% at Cherry Point ... I would take 1919 times 55% to give me line #7 on that one (since I had two homes)

Is that correct?

If so, then the only thing left is to figure out what percent was truly used by both homes.

[TomCopeland]

Time-Space%

^ since the percentages are different, I am guessing I take the total of 1919 and allocate to the percentage of that home?

So if I used 45% at Brookgreen, I would take 1919 times 45% to give me line #7

and 55% at Cherry Point ... I would take 1919 times 55% to give me line #7 on that one (since I had two homes)

Is that correct?

If so, then the only thing left is to figure out what percent was truly used by both homes.

I can't tell from what you say above whether you are correct or not. It will be easier for me to answer if you call me. Anytime (except during the Super Bowl) at 651-280-5991.

[Twinvillageiowa]

Please, please, PLEASE don't use Turbo Tax. There was an error in their software the first year I filed with them but nobody knew it,so I used it two more times. Imagine my surprise when I got a letter from the state telling me I owed almost $1,000! I wasn't worried because I had the TT audit protection. Turns out all that means is they will pay any interest payments but not cover the actual cost. This was the worst experience ever.