Tom Copeland Answers Questions From a Recent Facebook Live Session

“Can I deduct part of my farm tractor that we use to remove snow?”

“How do I deduct my new furnace?”

“I lost $2,300 in income when I had to move and wait for a new license. Can I deduct this?”

These are some of the many questions I answered on a recent Facebook Live broadcast sponsored by the Facebook Daycare Spaces and Ideas Community.

Their website is a place for providers to share photos of their childcare spaces, activities, meals and more.

Doing a Facebook Live broadcast was a new experience for me. This group sent me questions before the live Facebook broadcast. Last Friday I signed onto the group’s Facebook page and pushed the Facebook Live button which allowed everyone to see me as I answered questions and spoke for about an hour. During the broadcast providers posted many additional questions and I had to talk fast to answer them all! It was free to everyone.

The experience was fun and a good way for me to communicate with several hundred providers at once. I’ll be exploring ways I can do this type of training again.

Here are some of the questions and my answers from this broadcast:

Questions and Answers

Q: “Can I deduct part of my farm tractor that we use to remove snow?”

Yes, because removing snow is considered an “ordinary and necessary” expense. If the tractor is used 10% of the time to remove snow, deduct 10% of the cost.

Q: “How do I deduct my new furnace?”

A: If it costs less than $2,500 deduct the time-space % cost in one year. If it costs more, depreciate over 39 years, but then use the 50% bonus depreciation rule and claim half the depreciation in the first year.

Q: “I lost $2,300 in income when I had to move and wait for a new license. Can I deduct this?”

A: Unfortunately not. Money you don’t receive is not a deduction.

Q: “I transport children to school twice a day. Would I be better off using the standard mileage method or the actual expenses method in claiming car expenses?”

A: It depends. The more you use your car for your business the more likely the actual expenses method will get you a higher deduction. Also, if you drive a more expensive vehicle or have lots of car repairs, the actual method is likely to be better. But, it’s hard to know this when the year begins. So, you could start saving receipts for all car expenses and see which method gets you a higher deduction at the end of the year.

Q: “I’m finishing a basement to start a daycare. What can I deduct?”

A: This would be considered a home improvement, so it must be depreciated over 39 years. You can also use the 50% bonus depreciation rule to claim half the depreciation in the first year. If you only use the basement area for your business you can depreciate 100% of the cost, otherwise apply your time-space %. Note: if the total cost of the remodeling was less than $2,500 you could deduct it in one year.

Q: “I bought items on Craigslist but I didn’t save any receipts. Now what?”

A: Do your best to reconstruct a receipt. Make a note of what you bought, how much you paid for it and when you bought it. Take pictures of the items you bought. You are not required to have a receipt to claim a business expense. A receipt is the best type of record to have, so try to save all receipts if you can. But, don’t give up if you don’t have the receipt.

Q: “I moved from one city to another in mid year. How do I figure out my time-space %?”

A: You must calculate your time-space % for each home and file two Form 8829 Expenses for Business Use of Your Home where you will show house expenses for each home. If you used a room regularly in the first home, count it as regular use for that home. Count the hours worked in each home and divide by the total number of hours in that part of the year to determine your time% for each home.

Q: “My husband pays for health insurance through his employer. How much, if anything, can I deduct as a business expense. Can I deduct my daughter’s insurance premiums?”

A: The only way you can deduct health insurance as a business expense is to set up an HRA plan, hire your husband to do work for your business, and offer the HRA plan as an employee benefit. See more here.

Q: “I bought some new, larger appliances specifically for daycare. Can I deduct the entire amount or deduct the entire monthly payment as I pay it off?”

A: Items used for business and personal purposes are usually deducted using your time-space %. If you believe you are using them a lot more than your time-space% then you can calculate an actual business use percent. You can deduct in one year any individual item costing less than $2,500, so you can deduct these individual appliances in one year, even though you are making monthly payments. You can also deduct the time-space % of the interest you pay over time. Never try to deduct a portion of the monthly payment.

Q: “What category in Minute Menu Kids Pro/KidKare do I put yard mulch and flowers I plant to decorate the front of my home?”

A: Put it under repairs/maintenance on Form 8829 and apply your time-space %.

Q: “What is the best way of calculating my space percent. Some of my rooms are a weird shape.”

A: You’ll need to measure the square footage of each room in your home when calculating your space %. There’s an app that makes this a lot easier called RoomScanPro.

Q: “Is there an IRA I can still set up for 2016?”

A: Yes, the deadline to establish a Traditional IRA, Roth IRA, or MyRa is April 18, 2017. You may also be eligible for the Saver’s Tax Credit for any IRA contribution you make.

Q: “I refinanced my home. Can I claim a portion of the cost of refinancing?”

A: Spread the costs associated with refinancing your home (points, closing costs, etc.) over the life of the new loan.

Tom Copeland –

Categories: Deductions, Record Keeping & Taxes

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