Is Now the Time to Spend Money on a Big Project?

Are you considering building a patio, adding a fence, or redoing your driveway in the near future?

If so, you should seriously consider doing these projects before the end of 2022.

Since 2017, the 100% bonus depreciation rule has allowed family child care providers to deduct the business portion of these expenses in one year.

However, starting in 2023, the 100% bonus depreciation rule declines to 80% in 2023, 60% in 2024, 40% in 2025, and 20% in 2026, and a 0% rate in 2027 and later years. We don't know if Congress will make changes to this rule in the future.

Let's look at the impact of these changes.

For example, if you spent $10,000 on a patio, fence or driveway in 2022 and your Time-Space Percentage was 35%, you could deduct $3,500 on your 2022 tax return ($10,000 x 35% = $3,500). If you spent the same $10,000 on a patio in 2023, you would only be able to deduct 80% of the $3,500 or $2,800 on your 2023 tax return. The remaining $700 would have to be depreciated over 15 years.

This change also applies to the purchase of a new or used vehicle. The rules regarding vehicles are more complicated. They depend on whether you are using the vehicle more than 50% for your business and whether it weighs more or less than 6,000 pounds. See my 2021 Family Child Care Tax Workbook and Organizer for details.

If you have plans to make these purchases in the near future, 2022 is a good year to do so.

Tom Copeland - www.tomcopelandblog.com

Image credit: https://www.hgtv.com/outdoors/landscaping-and-hardscaping/10-things-you-must-know-about-paver-patios-pictures