Tax Status Of Family Child Care In A California Rental Home?

[Sergio]

In California, a licensed small family child care (for up to 6 kids) in a rental home is considered residential- not business- use of the property. So if that's a fact, then

- Can the licensed small family child care in a California rental home be registered as an LLC?
- If not, can the child care provider's income be taxed as business income (e.g. can the rent etc. be deducted from income taxes)?

[Thriftylady]

In California, a licensed small family child care (for up to 6 kids) in a rental home is considered residential- not business- use of the property. So if that's a fact, then

- Can the licensed small family child care in a California rental home be registered as an LLC?
- If not, can the child care provider's income be taxed as business income (e.g. can the rent etc. be deducted from income taxes)?

Not sure about the LLC, but on Federal taxes (not sure about cali state taxes) the rent etc can be deducted on a time/space percentage. This would include utilities used in the daycare, and such. There are special federal forms for this called business use of the home. There are several that go together. In my experience, states go by federal income, so it would carry down to state. But I think California has their own rules .

[Sergio]

There are special federal forms for this called business use of the home.

Ah, but this is exactly the crux of the issue. According to zoning laws, our child care will be a residential- not business- use of the home.

[Thriftylady]

Ah, but this is exactly the crux of the issue. According to zoning laws, our child care will be a residential- not business- use of the home.

I am not sure that matters. Hopefully Tom will chime in soon. He is the expert.

[Blackcat31]

Here is a great article about whether or not you should become an LLC or not

http://www.tomcopelandblog.com/2011/05/should-you-set-up-a-limited-liability-company-llc.html

Here is the link to Tom Copelands blog. TONS of great info! Book mark the site as you will reference it often.

http://tomcopelandblog.typepad.com/tom-copelands-taking-car/

[TomCopeland]

tax status

In California, a licensed small family child care (for up to 6 kids) in a rental home is considered residential- not business- use of the property. So if that's a fact, then

- Can the licensed small family child care in a California rental home be registered as an LLC?
- If not, can the child care provider's income be taxed as business income (e.g. can the rent etc. be deducted from income taxes)?

Establishing an LLC has nothing to do with whether or not the provider is living. So, yes, a provider can set up an LLC in a rental home.

Rent is always deductible.

[Sergio]

Thanks, Tom!
If possible, I'd like to buy one of (your?) e-books that explicitly mentions what you just wrote. Which e-book would you recommend?

[TomCopeland]

books

Thanks, Tom!
If possible, I'd like to buy one of (your?) e-books that explicitly mentions what you just wrote. Which e-book would you recommend?

Only two of my books are available as e-books: Family Child Care Record Keeping Guide and Family Child Care Contracts & Policies.

[Sergio]

Tom,
Sorry that I wasn't clear. I appreciate your free advice, but now would like to pay some money to get a more substantial advice. I could ask a lawyer, but I prefer to buy a book first on this subject. Can you recommend one that explicitly deals with the issue of running an LLC from a rental home in California?

[momtomany74]

Didn't even need to respond, Sergio
Good luck!

[TomCopeland]

rental

Tom,
Sorry that I wasn't clear. I appreciate your free advice, but now would like to pay some money to get a more substantial advice. I could ask a lawyer, but I prefer to buy a book first on this subject. Can you recommend one that explicitly deals with the issue of running an LLC from a rental home in California?

Nolo Press from California has published a lot of legal books. Check them out.

[Sergio]

Tom, you're too modest!
Will this book have all the information I need?

http://www.redleafpress.org/Family-Child-Care-Legal-and-Insurance-Guide-e-book-P919.aspx

[TomCopeland]

legal help

Tom, you're too modest!
Will this book have all the information I need?
http://www.redleafpress.org/Family-C...book-P919.aspx

My book will help explain the differences between the various forms of business structures but it's not a substitute for legal advice that can help you understand the particular rules in your state.