Help With Taxes (Second Year)- Question For Tom

[Unregistered]

Tom,
I have a very small daycare (currently 2 PTers, I am legally license exempt and do not want to run any larger in the foreseeable future). We have a somewhat larger home and our deductions are high when you take the T/S of mortgage, utilities, and other home expenses alone. So before I even add meal deductions and business expenses, I am showing a loss (this is my second year in business). I am unclear how to do things differently so I do not get audited over showing repetitive losses each year.
We are in plans to get new windows this year and I know that will just add to our losses if I include the T/S amount as a business expense (they are currently old and open outward over our 2-story backyard so I need to replace to make safe to open for fresh air when kids are present)
Even if I do not claim ANY expenses, our home expenses alone will probably put the business as a loss. What should I do? I have always intended to have a small business (its the income we need to supplement my husband's)

[TomCopeland]

Loss

Tom,
I have a very small daycare (currently 2 PTers, I am legally license exempt and do not want to run any larger in the foreseeable future). We have a somewhat larger home and our deductions are high when you take the T/S of mortgage, utilities, and other home expenses alone. So before I even add meal deductions and business expenses, I am showing a loss (this is my second year in business). I am unclear how to do things differently so I do not get audited over showing repetitive losses each year.
We are in plans to get new windows this year and I know that will just add to our losses if I include the T/S amount as a business expense (they are currently old and open outward over our 2-story backyard so I need to replace to make safe to open for fresh air when kids are present)
Even if I do not claim ANY expenses, our home expenses alone will probably put the business as a loss. What should I do? I have always intended to have a small business (its the income we need to supplement my husband's)

Since you are not trying to show a profit (by caring for more children), don't show a loss. Show a profit of zero. You can't claim any house expenses, on Form 8829, if they would create or increase a loss.
Show your income on Schedule. First, claim food expenses and supplies and car expenses. As long as you have a loss, you won't be able to claim any portion of your new windows. So, show expenses equal to, but no more than your income. Zero profit.

[Unregistered]

Since you are not trying to show a profit (by caring for more children), don't show a loss. Show a profit of zero. You can't claim any house expenses, on Form 8829, if they would create or increase a loss.
Show your income on Schedule. First, claim food expenses and supplies and car expenses. As long as you have a loss, you won't be able to claim any portion of your new windows. So, show expenses equal to, but no more than your income. Zero profit.

When using TurboTax, how do I get around having to use my T/S for our house expenses and use the full amount for Schedule A? And last question, if we are planning to end the business in 2015, could we get windows and claim it that final year if we showed a profit for 2 years and only a loss for one before that? When reading your chapter on closing your business, it sounded like you could claim anything you do to repair the home as long as the business was still operating- what happens to the rest of the depreciation?

[TomCopeland]

taxes

When using TurboTax, how do I get around having to use my T/S for our house expenses and use the full amount for Schedule A? And last question, if we are planning to end the business in 2015, could we get windows and claim it that final year if we showed a profit for 2 years and only a loss for one before that? When reading your chapter on closing your business, it sounded like you could claim anything you do to repair the home as long as the business was still operating- what happens to the rest of the depreciation?

Enter the full amount of your house expenses into Turbo Tax. It will spread them between Form 8829 and Schedule A. Before filing your taxes, check to be sure it does this. After you close your business in 2015, you won't be able to claim any more depreciation after that year.

[Unregistered]

Enter the full amount of your house expenses into Turbo Tax. It will spread them between Form 8829 and Schedule A. Before filing your taxes, check to be sure it does this. After you close your business in 2015, you won't be able to claim any more depreciation after that year.

Sorry Tom, I'm confused. I thought you said to not claim the house expenses for my business as it is causing loss? Can I just claim in all on my schedule A so I don't show a loss from home expenses?

[Unregistered]

Or, can I minimize my T/S by claiming lower numbers to the point of making a minmum profit, and thereby maximizing the mortgage expenses that are applied to our Schedule A?

[TomCopeland]

loss

Or, can I minimize my T/S by claiming lower numbers to the point of making a minmum profit, and thereby maximizing the mortgage expenses that are applied to our Schedule A?

Yes, your best bet is to have a low time-space % on Form 8829, so that more house expenses will show up on Schedule A.

[Unregistered]

Thanks so much Tom!