By Tom Copeland
Here are the key tax changes for 2013 that will affect family child care providers.
* A new IRS Safe Harbor rule allows providers to deduct up to $1,500 of their house expenses without receipts. To see whether this new rule will benefit you, fill out IRS Form 8829 Expenses for Business Use of Your Home. Compare line 35 with the amount you could claim using this new rule on IRS Form Schedule C, line 30. In almost every case providers will not benefit from using this new rule.
* The Standard Meal Allowance rate for 2013 is: $1.27 breakfast; $2.38 lunch/supper, and $.71 snack. The rate for 2014 is $1.28 breakfast; $2.40 lunch/supper and $.71 snack.
* The standard mileage rate for 2013 is $.565 per business mile. The rate for 2014 is $.56 per business mile.
* The 50% bonus depreciation rule allows provider to deduct half of the business portion of any items used in their business that would normally be depreciated, except the home and home improvements. The items must be purchased new. This rule expired on December 31, 2013.
* Retirement plan contribution limits for 2013: Regular or Roth IRA $5,500 (plus $1,00 if age 50 or older); SIMPLE IRA $12,000 (plus $2,500 if age 50 or older); SEP IRA 18.58% of profit.
* The Saver’s Tax Credit allows low-income providers to claim a tax credit for contributions to any IRA in 2013 (up to $2,000 in contributions). The income eligibility limits (profit) are: $59,000 married filing jointly; $29,500 single.
* If you have improperly treated assistants as independent contractors, the IRS will offer relief from an IRS audit if you apply for the Voluntary Classification Settlement Program.
Note significant rule change for 2014: A new rule in 2014 will allow providers to deduct items costing less than $500 in one year, rather than depreciating them.