Deducting Required Home Improvements

[Rainbow]

Hi. I'm starting up a home daycare. I am required by licensing to make a few home improvements first. Can I deduct these 100% or only a percentage?

[Mister Sir Husband]

I'm kind of curious about this as well. Even if I count my labor as free, by the time I'm done getting ready to open I will have probably spend around two thousand on the property (inside and out)

[Familycare71]

Great question!!!

[TomCopeland]

home improvements

Hi. I'm starting up a home daycare. I am required by licensing to make a few home improvements first. Can I deduct these 100% or only a percentage?

Great question. There is no clear IRS rule on this point. The assertive answer would be to deduct 100% of the cost. The conservative answer would be to deduct your time-space % of the cost. If it's an egress window I'd deduct 100% of the cost because it's not something a family would normally use. If it's something that is primarily used for your business I would be more likely to deduct 100%.

In all cases, a home improvement must be depreciated over 39 years. A land improvement (fence, driveway, patio) is depreciated over 15 years and is eligible for the 50% bonus depreciation rule.

[CrackerJacks]

Is the replacement of a toilet a home improvement?

[TomCopeland]

toilet

Is the replacement of a toilet a home improvement?

By itself, I'd say it was a repair. If it's part of a remodeling of a bathroom, it's an improvement.

[CrackerJacks]

Tom- we rent a home that is owned by a family member. We pay for Any improvements that are made. We were thinking of remodeling the kitchen. Does the same depreciation rule apply for people who rent and do not own?

[TomCopeland]

home improvement

Tom- we rent a home that is owned by a family member. We pay for Any improvements that are made. We were thinking of remodeling the kitchen. Does the same depreciation rule apply for people who rent and do not own?

Because you are in a residential rental property you can depreciate your home improvement over 27.5 years, instead of 39 years.

[EdwardLBrooks]

Rental property you can depreciate your home improvement over 27.5 years?Can we do so?I have many question about this,can we do the modeling of only bathroom?

[TomCopeland]

rental property

By rental property I mean you are renting it out to someone else. In this case, if you make a home improvement (remodel a bathroom) you would depreciate it over 27.5 years. If you own the property and are renting it from someone else, you would depreciate a home improvement over 39 years.

[Max]

Great question. There is no clear IRS rule on this point. The assertive answer would be to deduct 100% of the cost. The conservative answer would be to deduct your time-space % of the cost. If it's an egress window I'd deduct 100% of the cost because it's not something a family would normally use. If it's something that is primarily used for your business I would be more likely to deduct 100%.

In all cases, a home improvement must be depreciated over 39 years. A land improvement (fence, driveway, patio) is depreciated over 15 years and is eligible for the 50% bonus depreciation rule.

Hi Tom! Ran across this old thread when looking for more info on this.

Would it make sense (CYA if audited by the IRS) to ask my licensor for a written statement if I want to take an assertive approach and deduct 100% of a home improvement needed/done just for daycare? I read an article of yours that referred to getting a written statement from your licensor for a fence if licensing required you to have one (and then you can deduct 100% of the cost).

I have hot water baseboard heater covers that need to be replaced. I say need because I'm fairly certain my licensor will require this as a safety precaution and I can see why (old covers have 1.5" gap to the fins that radiate heat and new ones would have small perforated holes enclosing the heating element). They'll run about ~$900-$1400 just for the main daycare areas (not the whole home).

I'm wondering if I should get a written statement from my licensor before purchasing the new covers. Also, if the $2500 rule is extended to 2017, I could deduct this expense in one year, right?

Thanks in advance for any help!!

[TomCopeland]

licensing

Hi Tom! Ran across this old thread when looking for more info on this.

Would it make sense (CYA if audited by the IRS) to ask my licensor for a written statement if I want to take an assertive approach and deduct 100% of a home improvement needed/done just for daycare? I read an article of yours that referred to getting a written statement from your licensor for a fence if licensing required you to have one (and then you can deduct 100% of the cost).

I have hot water baseboard heater covers that need to be replaced. I say need because I'm fairly certain my licensor will require this as a safety precaution and I can see why (old covers have 1.5" gap to the fins that radiate heat and new ones would have small perforated holes enclosing the heating element). They'll run about ~$900-$1400 just for the main daycare areas (not the whole home).

I'm wondering if I should get a written statement from my licensor before purchasing the new covers. Also, if the $2500 rule is extended to 2017, I could deduct this expense in one year, right?

Thanks in advance for any help!!

Yes, get a statement from your licensor, then deduct 100% of the cost. The $2,500 rule is permanent.

[Max]

Yes, get a statement from your licensor, then deduct 100% of the cost. The $2,500 rule is permanent.

Thank you Tom!!