Recently Start An In-Home Daycare? Learn About Some Necessary Tax Preparation
Posted on: 22 July 2015
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Watching a few kids during the day is a great way to make some extra money. Unfortunately, the additional income just made your taxes a lot more complicated. While you do have to pay taxes on the money you made, you do get the benefits of additional write offs that will lower how much you owe Uncle Sam. Here is some tax preparation you will need to do before you see your accountant regarding your in-home daycare.
Gather Mortgage or Rent Documentation
You will be able to write off the square footage of the rooms you use for your in-home daycare. In order to determine how much each square foot of your home costs, you will need to gather all documentation regarding how much you pay every month.
If you rent your home, it will be as simple as getting a copy of your lease as proof of what you pay every single month. If you own your home, you will need documentation that shows how much you pay for your mortgage, property taxes, home insurance, and mortgage insurance.
Measure Your Rooms
Every single room that you use as part of your in-home daycare can be factored into your deductions. This includes the kitchen if you prepare food, the dining room if that is where you serve food, living room spaces where kids play during the day, bedrooms used for napping, and even bathrooms used by kids if they are potty trained.
Take measurements of all these rooms so you can calculate the square footage of your home that you use.
Gather Receipts
Anything that you buy for your in-home daycare can be a potential write-off, so hopefully you saved those receipts from over the past year. Not only does this included office supply involved for business use, but you can also write off toys and child proofing equipment as well.
Watching your own child along with others? You can write off the toys you buy for them too. You cannot claim the full amount, but as long as you use them for the children you take care of, you can write off a percentage of the cost based on how much is personal use and business use.
Don't forget expenses related to your car if you use it to take kids to the local park or other outdoor activities. Track mileage, gas purchases, and any other travel expenses related to these excursions.
Once you have gathered all your information, you are ready to meet with your accountant. They will be able to determine the best way to limit your tax liability and maximize the write-offs you are able to take for your in-home daycare. For more information on taxes and how they work for your situation, visit HBE Becker Meyer Love LLP.