The year 2016 saw a number of tax changes that affect family child care providers.
* In late 2015 the IRS announced that providers may deduct in one year (rather than depreciating) items they purchased in 2015 that cost less than $2,500. This rule is permanent and applies to any purchase in 2016. Providers must include a written statement with their tax return indicating they are electing this rule. See my article.
* 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. See my article.
Note: The standard meal allowance rate is going down slightly in 2017, but this should not cause you to drop off the Food Program.
* The standard mileage rate for 2016 is $.54 per business mile. The rate for 2017 has not yet been announced. See my article.
* The 50% bonus depreciation rule has been extended through 2019. In 2018 it will be reduced to 40% and in 2019 it will be reduced to 30%. This rule allows providers who purchased new furniture, appliances, playground equipment and office equipment to deduct half of the normal depreciation in 2016. See my article.
* 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. See my article.
* In 2015 the IRS relaxed the rules defining what is a repair (deduct in one year) vs. a home improvement (depreciate over 39 years). Repairs can now include replacing a few windows, installing a wood or tile floor and replacing roof shingles. Many providers are not aware of this rule which is permanent and can be used for purchases in 2016. See my article.
* In addition, in 2015 the IRS also passed a rule stating that under certain circumstances providers may be able to deduct fences/patios/driveways and home improvements in one year, rather than having to depreciate them. See my article.
If you use a tax professional make sure she or he understands these changes.
To learn more about these new rules, visit my website at www.tomcopelandblog.com or see my 2016 Family Child Care Tax Workbook and Organizer, published by Redleaf Press, which will be available in early January 2017.
Tom Copeland – www.tomcopelandblog.com