The Tax Consequences of Renting

6a0133f3fc5805970b01bb07d39c12970d-320wiWhen you rent something that is used in your family child care business, you can deduct it using the rules described below:

House/Apartment – Deduct the Time-Space % of your monthly rent. You won’t be able to claim any mortgage interest or property tax (unless you are responsible for paying the property tax).

You also won’t be able to depreciate your home (because you don’t own it). You can deduct utilities, repairs, and home improvements you pay for.

Car – If you lease your car you can choose to claim car expenses by using either the standard mileage rate or the actual car expenses method. You won’t be able to claim any car loan interest (because you aren’t making car payments). I wrote an article earlier about why it doesn’t make financial sense to lease a car.

Equipment – If you rent equipment used in your business (furniture, play equipment, party equipment, inflatable slides, tents, etc.) you can deduct 100% of the cost if it is only used during day care hours. If not, you can use your Time-Space %, or calculate an actual business use percentage.

Other – If can also deduct videos that you rent from Netflix or your local video store (are they still around?) and you can deduct the tools, etc. that you rent to fix your home.

Tom Copeland –

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2014 TW smallFor more information about how to deduct renting expenses, see my 2014 Family Child Care Tax Workbook and Organizer.

Categories: Deductions, Record Keeping & Taxes

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1 reply

  1. Tom,
    When you say you can deduct tools you rent to fix your home, what about the cost to buy a tool to fix your home? I assume so. When doing a complete inventory of what I own, do I have to take the deductions of the value of my items using time/space percentage the year I start my business or can I wait until the second year?(meaning, I started in 2014, can I wait until the 2015 tax year to deduct some of them I didn’t deduct in 2014)

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