Buying a House & Taxes

[Malmom]

We are in the process of buying a house. Our loan is in underwriting now, and the underwriter is saying that I did my taxes wrong by claiming 100% of the house. I know we are allowed to do that though, and I do use every part of my home for daycare.

I'm afraid this will jeopardize my loan unless I have proof that I can use 100% of my home. Can anyone point me to the IRS rule that states daycare workers can use their entire home?

[Thriftylady]

Even if you use 100% of your home, you can't claim 100% use on taxes if you live in the home. You have to do the time space percentage which looks at how much of your home you use, and for how many hours per day. But to claim 100%, the kids have to have access to all bedrooms, bathrooms, etc. Even at using 100% your time space percentage would never be 100%, unless you had kids 24/7, 365 days a year.

[Thriftylady]

Tom Copeland covers it here http://www.tomcopelandblog.com/2011/...tage-quiz.html

[Malmom]

Even if you use 100% of your home, you can't claim 100% use on taxes if you live in the home. You have to do the time space percentage which looks at how much of your home you use, and for how many hours per day. But to claim 100%, the kids have to have access to all bedrooms, bathrooms, etc. Even at using 100% your time space percentage would never be 100%, unless you had kids 24/7, 365 days a year.

I do use a T/S percent- it's around 38%. It's different every year.

They are saying that I'm not allowed to claim 100% of the total square footage of my home to calculate my T/S. We use every in my house- whether it's for nap time, eating, or playing. It all gets used in some way, every day.

[TomCopeland]

Home

I do use a T/S percent- it's around 38%. It's different every year.

They are saying that I'm not allowed to claim 100% of the total square footage of my home to calculate my T/S. We use every in my house- whether it's for nap time, eating, or playing. It all gets used in some way, every day.

You are right, they are wrong. Family child care is the exception to the general rule that you must use a room exclusively for business to be able to claim expenses associated with your home.

Refer them to IRS Form 8829, line 1 which says, "Area used regularly and exclusively for business, regularly for daycare, or for storage or inventory or product samples."

The instructions to Form 8829 also make it clear that you are entitled to claim up to 100% of the space of your home and then apply your time percent.

If you are still having problems, call me at 651-280-5991.

[laundrymom]

You are right, they are wrong. Family child care is the exception to the general rule that you must use a room exclusively for business to be able to claim expenses associated with your home.

Refer them to IRS Form 8829, line 1 which says, "Area used regularly and exclusively for business, regularly for daycare, or for storage or inventory or product samples."

The instructions to Form 8829 also make it clear that you are entitled to claim up to 100% of the space of your home and then apply your time percent.

If you are still having problems, call me at 651-280-5991.

(Can I give a huge shout out to Tom!?
Always a supporter for our needs. Always there.
I've been collecting his books and advice longer than I've been coloring my gray. Love him. )