Building Permit Expense Incurred 2014

[XJ035]

For several years we used an attached sun room in our daycare. Last year we realized it was too far gone to use it another year. We put money down, had the old sun room removed and payed for building permit expense. This all was incurred in December of 2014. The actual replacement was not started or completed until 2015 at a cost of ~ $35k.
We didn't claim any for this on our 2014 taxes. Please explain how we should proceed and what should have been filed in 2014.

The sun room is used 100% for the daycare.

We will probably close the daycare in ~ 3 years when my mandatory IRA deductions begin. Some help on depreciation advice would be welcome.

Thank you,
Jim

[TomCopeland]

home improvement

For several years we used an attached sun room in our daycare. Last year we realized it was too far gone to use it another year. We put money down, had the old sun room removed and payed for building permit expense. This all was incurred in December of 2014. The actual replacement was not started or completed until 2015 at a cost of ~ $35k.
We didn't claim any for this on our 2014 taxes. Please explain how we should proceed and what should have been filed in 2014.

The sun room is used 100% for the daycare.

We will probably close the daycare in ~ 3 years when my mandatory IRA deductions begin. Some help on depreciation advice would be welcome.

Thank you,
Jim

You can either divide the expense between 2014 and 2015 or show it all in 2015. If you choose the first option, add up the 2014 costs and depreciate them over 39 years as a home improvement, year 1. Then add up the 2015 expenses and start depreciating them as a home improvement in 2015 over 39 years, year 1.
Or, wait until 2015 and depreciate the total cost over 39 years, year 1.
Because the sun room is used 100% for business, depreciate the full cost.

When you close the business you won't be able to take any more depreciate on this.

[XJ035]

re: Building permit expense

Thank you for the quick and detailed reply. I sometimes feel like I'm walking around blind with all the filings, taxes, etc.

Jim