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Daycare and Taxes>Shared Supplies
suehelen 02:24 AM 01-09-2013
Where do I enter shared supplies? And at what percentage? Time space? Or actual child use percentage?
TomCopeland 11:05 AM 01-09-2013
Let me answer this question in a more general way.

For any item you buy that is used for your business, you need to first determine if it's used exclusively for your business (100% deductible) or not (shared).

If it's shared (used both by your business and your family) the simplest way to go is to apply your time-space % to the cost and then deduct it. If the item costs hundreds of dollars (swing set, etc.) it might be worthwhile to calculate an actual business use percent after keeping records to show this for a month or two.

When you are ready to enter expenses on your tax return, follow this process. Let's use the example of Supplies. There is a line on Schedule C (line 22) that says Supplies. Add up all your supplies that were 100% business. Then add up all your supplies that were shared and multiple them by your time-space %. Now add your 100% supply total to your shared total and put the result on line 22. (If you did do an actual business use percent on some items, add this to the total.)

Use this same process for all your expenses. That is, make sure you are identifying 100% business items and shared items. If you lump them all together as 100% items you will be deducting too much. If you lump them all together as shared items and then multiply the total by your time-space % you will be deducting too little.

Sometimes tax preparers don't understand that you have both 100% business and shared items. If they ask you, "How much did you spend on supplies?" this is the wrong question. They should always be asking, "How much did you spend on 100% business supplies and how much did you spend on shared supplies?" If you are giving your tax preparer the amount you spent on supplies, make sure you are giving them two numbers, not one.

This concept is vital to having an accurate tax return.

Join me for a webinar “2012 Tax Changes: How to Avoid Mistakes on Your Tax Return” Tuesday, February 12th at 8:30-10:00pm Eastern Time. The cost is $25 (100% tax deductible!). To register:
suehelen 02:32 AM 01-10-2013
Got it! Thanks Tom!
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