legomom922 07:27 AM 03-11-2011
I have saved this for last because its too confusing for me. So I have some questions:
1. Do I actually have to take inventory of my house and put down everysingle piece of furniture, nick nacks that I have in my complete home???
2. Am I suppose to guess how much it is worth at the time I went into business? Like am I suppose to use what I could sell it for on CL or a garage sale?
3. Am I suppose to put down where I bought each item in my home? What if I dont remember?
4. What is convention method and I do I know which to choose? What is half yr mean anyway??
5. Same with depreciation method...which do I pick?
6. Is it true anything over $100 that I bought gets depreciated? High chairs, etc? What if it was only a used high chair for $20..Does that make it a supply expense vs something that het depreciated?
I am soooooooooooooooooooooooo lost here!
TomCopeland 10:50 AM 03-11-2011
1) You don't have to track all of this and claim depreciation expenses. However, it will save you a bunch of taxes and it is worthwhile doing so. If you can't face doing it this year, you can always do it next year.
2) Yes, estimate what each item was worth at the time you first started using it in your business. Using garage sale or CL prices is fine.
3) If you remember where you bought it, write it down. If you don't remember, that's fine. No one would be expected to remember everything. Take pictures as well to show the items.
4) Don't worry about recording conventions. Let your tax preparer deal with this. If you are doing taxes yourself - put half year convention for everything except your home and home improvements. Put mid month convention for the home and home improvements. Mid month means you start claiming depreciation in the month you first started using it. Half year convention means you get a half year of depreciation in your first year, regardless of what month the item was first used in your business.
5) Depreciation method - Choose accelerated method, except for the home and home improvement (choose straight line). Accelerated means you get higher depreciation deductions in the early years and lower in the later years. Straight line means you get the same deduction each year.
6) The general rule is that anything you bought after your business began that costs less than $100 you can deduct in one year. Anything over $100 you depreciate. There are exceptions. You can use Section 179 to deduct in one year qualified items (furniture, appliances, computers) if you use them more than 50% in the first year of use. Repairs can also be claimed in 1 year.
All the depreciation rules are spelled out in my 2010 Family Child Care Tax Workbook and Organizer (
www.redleafpress.org).
Good luck!
legomom922 01:54 PM 03-11-2011
Originally Posted by TomCopeland:
1) You don't have to track all of this and claim depreciation expenses. However, it will save you a bunch of taxes and it is worthwhile doing so. If you can't face doing it this year, you can always do it next year.
2) Yes, estimate what each item was worth at the time you first started using it in your business. Using garage sale or CL prices is fine.
3) If you remember where you bought it, write it down. If you don't remember, that's fine. No one would be expected to remember everything. Take pictures as well to show the items.
4) Don't worry about recording conventions. Let your tax preparer deal with this. If you are doing taxes yourself - put half year convention for everything except your home and home improvements. Put mid month convention for the home and home improvements. Mid month means you start claiming depreciation in the month you first started using it. Half year convention means you get a half year of depreciation in your first year, regardless of what month the item was first used in your business.
5) Depreciation method - Choose accelerated method, except for the home and home improvement (choose straight line). Accelerated means you get higher depreciation deductions in the early years and lower in the later years. Straight line means you get the same deduction each year.
6) The general rule is that anything you bought after your business began that costs less than $100 you can deduct in one year. Anything over $100 you depreciate. There are exceptions. You can use Section 179 to deduct in one year qualified items (furniture, appliances, computers) if you use them more than 50% in the first year of use. Repairs can also be claimed in 1 year.
All the depreciation rules are spelled out in my 2010 Family Child Care Tax Workbook and Organizer (www.redleafpress.org).
Good luck!
Tom,
Accelerated is not a choice in teh menu it has either straight line, 200% declining 7 yr or other, so which one would I pick?
If my dishwasher is old and was put into service way before I started my business and is worth less than $100, do I still claim depreciation on that or other items? Or do I claim depreciation only on things that are currently worth over $100