Start Up Cost (IRS Special Rule)

[Lyss]

I started caring for children in May so for my T/S% I calculated hours in the year from May through December and read that because of this I can not deduct expenses for the prior months, so I haven't included the initial costs of items that I bought when I began setting things up (before I had DCKs) because they were incurred in April not May.

Then later in the Family Child Care Tax Workbook and Organizer I read the section about the start up cost special rule. Is this something that I can use to apply on those items purchased in April (things like plates, dishes, toy storage, kids table but no one item over $100 that the depreciation rule would apply to) or no?

Thanks!

[TomCopeland]

Start up costs

When you start your business in the middle of the year, you do calculate your time-space % as you have described. Then you can deduct house expenses for those months you were in business (property tax, mortgage interest, utilities, house insurance, house repairs, house depreciation).

But, for other expenses that you purchased before your business began and purchased for your business, you can deduct all of them just as if you purchased them after your business began. If you purchased items that cost more than $100 you can depreciate them just as if you purchased them after your business began.

For items that you owned before you went into business (not counting those you purchased for the business) you can depreciate them, regardless of what they were worth when your business began. This includes furniture, appliances, and all household items. Do an inventory of these items and depreciate them. It can represent a lot of money. I describe this in my FCC Record Keeping Guide. You can also read about this on my blog.

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[melilley]

I have this same question, but I opened (had my first child start) in Feb. of 2013, but purchased a lot of items in 2012 for the daycare, before I opened. Do I enter them into MMK under record expenses for 2013, even thought the receipt says 2012?

And also as far as depreciating appliances, furniture, etc... that I had before opening how do I know the depreciation method and convention? I'm going to someone to do mine so do I just select other?

One more question: I bought a lot of toys/activities from garage sales or cl and didn't think to even get a receipt. Do I have to go through the dc room and record everything one by one or can I group the garage sale/cl items together?

TIA!

[TomCopeland]

expenses

I have this same question, but I opened (had my first child start) in Feb. of 2013, but purchased a lot of items in 2012 for the daycare, before I opened. Do I enter them into MMK under record expenses for 2013, even thought the receipt says 2012?

And also as far as depreciating appliances, furniture, etc... that I had before opening how do I know the depreciation method and convention? I'm going to someone to do mine so do I just select other?

One more question: I bought a lot of toys/activities from garage sales or cl and didn't think to even get a receipt. Do I have to go through the dc room and record everything one by one or can I group the garage sale/cl items together?

TIA!

Claim your 2012 expenses in 2013, when your business began. When entering depreciation items into Minute Menu, don't use the straight line method (use the 200% or 150% declining balance method). Use half year convention for every item except home improvements and the home.

Lump garage sale items together if you want. Take pictures of them and write a note for your own records as to where you bought them and how much they cost (use your best guess).