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Daycare and Taxes All things related to Taxes and running a Daycare post here. Topics of tax exemptions, forms, filings, tax write offs, IRS etc.

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Old 02-13-2016, 07:51 AM
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tn0087 tn0087 is offline
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Default Sale of Home and New Construction Crossing Over Tax Year... Yikes!

I'm hoping I can explain this situation in a way that someone understands to help provide some guidance with our tax filing for 2015. I'm looking in your direction, Tom, but I'd love to hear if anyone has gone through something similar.

We sold our previous home to build a new home. On 10/29/15 we closed on the construction loan for our new home. We carried the construction loan and previous mortgage until 12/4/15 when we closed on the sale of our previous home. Daycare was registered and active up until 12/4/15. At that point, we moved to an apartment and Daycare was suspended until our new house was completed and the Daycare was registered and started up again on 2/8/16 in the new construction home. On 2/12/16 we converted our construction loan to a permanent mortgage.

Yes, it was all the nightmare it sounds it was...

That being said, my question comes in the form of how to represent this on our 2015 Taxes. I have two questions:

1. Our gain on the sale of the previous home was less considerably than $500,000 so I don't believe I am responsible to claim the profit against our taxes. I do know that I need to look back at depreciation for the past 5 years, but how do I need to handle this information on the taxes? Do I report all monies recorded as depreciation deductions as income this year?

2. When we started the construction loan process, the daycare was in full swing. Is it possible to deduct the expenses related to building the house as you would against a conventional mortgage? Is there anywhere that provides guidance on what can/can't be deducted?

I've looked around our area for a Tax Professional who is well-versed in Home Daycare tax rules but have been unable to find one. I don't typically have issues with reporting our taxes (we have it down to a science now) but this is an unusual situation for us.

Thank you!
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Old 02-13-2016, 01:40 PM
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Default sale of home

Quote:
Originally Posted by tn0087 View Post
I'm hoping I can explain this situation in a way that someone understands to help provide some guidance with our tax filing for 2015. I'm looking in your direction, Tom, but I'd love to hear if anyone has gone through something similar.

We sold our previous home to build a new home. On 10/29/15 we closed on the construction loan for our new home. We carried the construction loan and previous mortgage until 12/4/15 when we closed on the sale of our previous home. Daycare was registered and active up until 12/4/15. At that point, we moved to an apartment and Daycare was suspended until our new house was completed and the Daycare was registered and started up again on 2/8/16 in the new construction home. On 2/12/16 we converted our construction loan to a permanent mortgage.

Yes, it was all the nightmare it sounds it was...

That being said, my question comes in the form of how to represent this on our 2015 Taxes. I have two questions:

1. Our gain on the sale of the previous home was less considerably than $500,000 so I don't believe I am responsible to claim the profit against our taxes. I do know that I need to look back at depreciation for the past 5 years, but how do I need to handle this information on the taxes? Do I report all monies recorded as depreciation deductions as income this year?

2. When we started the construction loan process, the daycare was in full swing. Is it possible to deduct the expenses related to building the house as you would against a conventional mortgage? Is there anywhere that provides guidance on what can/can't be deducted?

I've looked around our area for a Tax Professional who is well-versed in Home Daycare tax rules but have been unable to find one. I don't typically have issues with reporting our taxes (we have it down to a science now) but this is an unusual situation for us.

Thank you!
You won't owe any taxes on the profit on the sale of your home because it was less than $500,000. You will owe taxes on the depreciation you claimed (or were entitled to claim) on the old home. Look on your old Form 8829s to see how much depreciation you claimed. For your 2015 taxes fill out Form 8949 and Schedule D to report this.

You can claim the time-space % on the interest on your construction loan for the new home starting in 2016. You will depreciate your new home based on what you spent on it, minus the value of the land. Depreciate this over 39 years.
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Old 02-13-2016, 04:51 PM
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tn0087 tn0087 is offline
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Default

Thanks, Tom! Can we claim time - space % on the interest we paid in 2015 on the construction loan? Or is there a reason that has to wait until 2016?
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Old 02-14-2016, 07:01 AM
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Default interest deduction

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Originally Posted by tn0087 View Post
Thanks, Tom! Can we claim time - space % on the interest we paid in 2015 on the construction loan? Or is there a reason that has to wait until 2016?
Yes, deduct on your 2015 tax return.
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Old 03-04-2016, 03:12 PM
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tn0087 tn0087 is offline
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Default getting there....

A couple more questions on this if you have a second.

1. Can we deduct the cost of hiring movers to move us from our old home to the new home? If so, what time/space would we use? Can we use the previous daycare's rate since we aren't established as the new daycare officially in the same tax year?

2. We purchased new appliances for the move. We did use them at the old house briefly. I plan to write those off, but the refrigerator is just over $2500. Can we wait to depreciate that in 2016? Or do we start depreciating in 2015 using that time/space and then also charge ourselves back that depreciation as income on the same return?

Thank you!
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Old 03-05-2016, 07:36 AM
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TomCopeland TomCopeland is offline
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Default Moving

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Originally Posted by tn0087 View Post
A couple more questions on this if you have a second.

1. Can we deduct the cost of hiring movers to move us from our old home to the new home? If so, what time/space would we use? Can we use the previous daycare's rate since we aren't established as the new daycare officially in the same tax year?

2. We purchased new appliances for the move. We did use them at the old house briefly. I plan to write those off, but the refrigerator is just over $2500. Can we wait to depreciate that in 2016? Or do we start depreciating in 2015 using that time/space and then also charge ourselves back that depreciation as income on the same return?

Thank you!
You can only deduct the cost of moving if the primary purpose of the move was for your business and the move was at least 50 miles.Since you started using the refrigerator in your business in 2015, depreciate it starting in 2015 using your time-space%. I don't understand what you mean by charging yourselves back the depreciation. Please clarify.
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