End-of-the-Year Tax Savings Tips

There are several ways a family child care provider can reduce her taxes before the end of the year.

The goal is to accelerate your deductions into the current year and delay income until the following year. Here are some ideas:

1) Stock up on business supplies and materials before the end of the year. These can include: arts and crafts supplies, cleaning supplies, kitchen supplies, curriculum materials, and so on.

If you pay by credit card for an item purchased in this year, it’s considered this year's expense, even if you don’t pay the bill until next year.

2) Ask parents to pay you next year for the last several weeks of care this year. Money you receive next year for child care delivered in this year is reported by you as taxable income on your next year's tax return.

If a parent gives you a check on December 31st, but you don’t deposit it until next year, it’s still considered income to you this year (the date you received the check).

3) The sooner you make a contribution to an IRA, the more money you will have at retirement. You can set up a Traditional IRA or SEP IRA before April 15th. Any contributions you make to these IRAs before then will reduce your personal taxable income for this year.

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 contribution and interest at retirement tax free.

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 can itemize your taxes.

5) Take advantage of recent IRS rules that allow you to deduct all items for your business in one year rather than depreciating them. The exceptions to this rule is that you must depreciate over 39 years the purchase of a home, home improvement or land improvement.

Follow these simple steps to save a little more money!

Tom Copeland – www.tomcopelandblog.com

Image credit: https://commons.wikimedia.org/wiki/File:TAX_bag_filled_with_USD.jpg

For more information about filing your tax forms, see my book Family Child Care Tax Workbook and Organizer.