There are still ways a family child care provider can reduce her 2013 taxes before the end of the year.
The general idea is to accelerate your deductions into 2013 and delay income until 2014. Here are some specific tips:
1) If you are thinking about buying new items such as furniture, appliances, computers, fence, etc., you may be better off buying them before the end of the year. By doing so you can take advantage of the 50% bonus depreciation rule and reduce your business taxable income. See my article that explains the 50% bonus rule.
There is a new rule for 2014 that allows you to deduct up to $500 of the above items in 2014, rather than depreciating them. (See my article on this new rule).
Should you buy the item in 2013 and use the 50% bonus rule or should you wait to buy it until 2014 where you can deduct the entire business portion?
If you plan to purchase a new item that costs more than $500, do so in 2013 to take advantage of the 50% bonus rule, because you can’t use the new depreciation rule in 2014 for items that cost more than $500.
If you plan to purchase a used item worth less than $500 buy it in 2014, because you can’t use the 50% bonus rule for used items. If you bought it in 2013 you would have to depreciate it, whereas you can deduct it all in 2014.
2) Stock up on business supplies and toys for 2014 by purchasing them in 2013. Such supplies can include: arts and crafts supplies, cleaning supplies, kitchen supplies, curriculum materials, etc. If you pay by credit card for an item purchased in 2013, it’s considered a 2013 expense, even if you don’t pay the bill until 2014.
3) Ask parents to pay you in 2014 for any remaining child care payments they owe you for 2013. Money you receive in 2014 for child care delivered in 2013 is reported by you as taxable income on your 2014 tax return, not 2013. If a parent gives you a payment check on December 30th, but you don’t deposit it until 2014, it’s still considered income to you in 2013 (the date you received the check).
If you set up or contribute to a ROTH IRA you won’t reduce your taxes this year, but you will save money later when you withdraw the contributions at retirement.
If you have set up a SIMPLE IRA before October 1 2013, you can make a contribution to it before April 15, 2014 and reduce your personal taxable income. If you haven’t already set up a SIMPLE IRA for 2013, it’s too late to do so.
4) If you make contributions to a charitable organization before the end of the year, you may be able to reduce your personal taxable income if you are able to itemize your taxes.
Tom Copeland – www.tomcopelanblog.com
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