2016 Tax Changes Affecting Family Child Care Providers

2016 Tax Changes Affecting Family Child Care Providers

* The standard mileage rate for 2016 $.54 per business mile.

* The standard meal allowance rate for 2016 is: $1.32 breakfast, $2.48 lunch/supper and $.74 snack. Use this rates for all meals and snacks served in 2016 (including meals and snacks not reimbursed by the Food Program). You may deduct up to one breakfast, one lunch, one supper and three snacks per day, per child.

* Providers may deduct in one year (rather than depreciating) items they purchased in 2016 that cost less than $2,500. Providers must include the following written statement with their tax return indicating they are electing this rule.

“Section 1.263(a)-1(f) De Minimis Safe Harbor Election

Your name _________________

Your address __________

EIN or Social Security Number __________

For the year ending December 31, 2016 I am electing the de minimis safe harbor under Treas. Reg. Section 1.263(a)-1(f) for my business expenses of less than $2,500.”

 

* The 50% bonus depreciation rule has been extended to 2016. It was originally set to expire at the end of 2014, but was extended by Congressional action in December 2015. This rule allows providers who purchased new furniture, appliances, playground equipment and office equipment to deduct half of the normal depreciation in 2016.

* The income limits to qualify for the IRS Saver’s Credit has increased to $61,000 (adjusted gross income) for couples filing jointly and $30,500 for individuals or married people filing separately.

* The IRS has relaxed the rules defining what is a repair (deduct in one year) vs. a home improvement (depreciate over 39 years). Repairs may now include replacing a few windows or doors, installing a wood or tile floor and replacing roof shingles.

* Under certain circumstances providers may be able to deduct fences/patios/driveways and home improvements in one year, rather than having to depreciate them.

 

Tom Copeland – www.tomcopelandblog.com



Categories: Deductions, Record Keeping & Taxes

9 replies

  1. Can you explain more the circumstances for deducting a fence/patio/driveway? Would this also include a deck?

    I need to replace my 6′ privacy fence as it’s old and repairing it isn’t an option. The same goes for my deck. 30 years old, wood is rotting, and after trying to repaint it, the Behr product totally made it worse and is now peeling up in sheets. I don’t think the peeling paint would pass any inspection.

    I’ve had estimates on both, and is much higher than I expected. Being able to deduct some of this cost would help me make my decision.

    Thank you

    • If replacing the fence or deck costs less than $2,500 you can deduct the business portion in one year. If the fence costs more than $2,500 you can use the bonus depreciation rule and depreciate it over 15 years. For the deck that costs more than $2,500 you must depreciate it over 39 years.

      • why would a 20 yr roof be depreciated for 39 yrs? If I got financing for my new roof, can I deduct the interest paid on the roof loan?

        • Because the rule says 39 years as a home improvement. Yes you can deduct the time-space 5 of the interest. If you only replaced the shingles you can treat this as a repair and deduct it in one year, rather than depreciating it.

  2. I am a new provider and need more information on how to make my taxes and how to do record keeping for my taxes and my business

    • My website has many articles on record keeping and taxes. My book Family Child Care Record Keeping Guide lists over 1000 business deductions and how to keep good records. My 2016 Family Child Care Tax Workbook and Organizer explains how to file your federal tax forms. If you have specific questions I’m happy to try to answer them.

  3. I have a separate entryway used exclusively for my child care. The asphalt and walkway were torn to shreds and were dangerous for the children. Repairs to the asphalt and replacing areas with pavers plus repairs on our entryway stairs cost us $4767. Is it necessary to depreciate that?

    • Repairs are always deductible in one year regardless of the cost. Repairing asphalt is a repair. Replacing asphalt with pavers sounds like an improvement, not a repair. If so, you can depreciate this as a land improvement and use the 50% bonus depreciation rule. Both can be 100% business deduction because they are never used personally (if true). Repairs to the stairs is a repair and can be deducted in one year. Again, deduct 100% if use exclusively for your business. If you have a question about the pavers call me at 651-280-5991.

  4. Thank you so much for your quick response! The laws are so confusing when it comes to daycare! I just started the KidKare software today and look forward to using it! Thanks!

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