New appliances and home daycare

[taxgirl]

I have a client that operates a daycare from her home. She purchased new appliances in 2014 and wants to use part of the expense against her income. There is a legitimate argument that the fridge is used to store the food she prepares, the stove cooks the food she serves (and the playdoh she makes!), the washer and dryer clean the sheets they use for napping etc...

1) would you include these on her return?

2) would you allocate the % (based on hours) used for the business?

Thanks.

[Bob McCoy]

Sounds legit to me. Have never ran across any info stating that listed property is treated any differently for daycare, than it would be for another type of business. (I know that rooms in the house are not treated the same way) The fridge would be hard to separate hours of use, given the fact the contents would be intermingled. For that I would just estimate how much space was taken up with daycare stuff. Time of use seems logical for other appliances.

[Kram BergGold]

What I would do

I would depreciate or 179 expense based on what the client says is the business percentage of use.

[Bob McCoy]

Also figure if used for business 50% or more to make sure can take 179 deduction.

[taxgirl]

We have the appliances settled but there is a part 2...

The client is insisting that based on information from a daycare guru that they can depreciate the cost of remodeling their kitchen and new roof. Pub 587 spells out the difference between repair and permanent improvements so I say no. Does anyone know of something different based on the fact the business is a daycare?

[TaxGuyBill]

Yes, they can depreciate the cost of the improvements (over 39 years) based on their business percentage (usually the Time/Space percentage).

[taxea]

We have the appliances settled but there is a part 2...

The client is insisting that based on information from a daycare guru that they can depreciate the cost of remodeling their kitchen and new roof. Pub 587 spells out the difference between repair and permanent improvements so I say no. Does anyone know of something different based on the fact the business is a daycare?

Is this daycare guru a tax pro? Was the remodel and roof an ordinary and necessary part of the business use of the home would be my question. As for the appliances, I say that the % of electricity used by the daycare would already cover the use of the appliances.

[Kram BergGold]

Maybe Safe Harbor

We have the new safe harbor rules for improvements that are less tehan 2% of unadjusted basis. I saw on one post that someoen said this could not be used for home office. I had not seen or heard that previously and am skeptical. However, my guess is the cost of a roof and a kitchen is way more than 2% of unadjusted basis. Assuming this is a no go I would tell client to have her GURU prepare the return.

[taxea]

Kram said I would tell client to have her GURU prepare the return. I agree

[Burke]

Yes, they can depreciate the cost of the improvements (over 39 years) based on their business percentage (usually the Time/Space percentage).

I agree. I am also assuming she is already depreciating part of her home as business-related. These would just be added to that basis.

[Roland Slugg]

The use of one's home for daycare is covered by the rules regarding "Expenses for Business Use of Your Home," and there are even special lines on F-8829 for that very thing. The instructions for that form may be helpful.

P.S. What is a daycare Guru? Just wondering.

[taxgirl]

Tom Copeland is the person. It never ceases to amaze me how much gray area there is, or appears to be in tax law.
I have included the appliances at the percentage based on hours also depreciated roof at same percentage. Won't do the kitchen remodel, just doesn't seem right to me.

[oceanlovin'ea]

I have beauticians and massage therapist that deduct $5 per load of laundry they do to wash towels and sheets that they use in their business. This covers the cost of water, detergent, fabric softener and electricity. You might allow something along those lines for her laundry.

Linda, EA

[taxea]

I have beauticians and massage therapist that deduct $5 per load of laundry they do to wash towels and sheets that they use in their business. This covers the cost of water, detergent, fabric softener and electricity. You might allow something along those lines for her laundry.

Linda, EA

How was the 5. per load determined?

[oceanlovin'ea]

I can't remember where or who told me that. It is a figure I have used for years. Maybe I should increase it due to inflation.

Linda, EA