What are the tax consequences of closing my daycare?
Is it better to close at the end of the year or do it not matter really?
I am wondering about big item deductions like hosuehold items/repairs/roof/ etc. Do you have to pay a portion of what you took of or do you get to take the remaining since you are going to quit doing daycare?
Planning on closing my daycare and want to know if I should be paying more in quarterly because of a big hit I will take at tax time?
TomCopeland 08:39 AM 09-26-2012
If you have been depreciating items for your business (furniture, appliances, home, etc.) you get to claim depreciation for the last year you are in business, but no more. You don't get to claim the remaining depreciation left. So, if you bought a sofa in 2010 and went out of business at the end of 2012, you don't get the remaining 4 years of depreciation (sofas are 7 year property).
If you ever used the Section 179 rule to write off an item in one year that you would normally depreciate, you have to pay back some of the deductions you previously claimed. Section 179 does not apply to home improvements, the home or fences.
If you used the 100% or 50% bonus depreciation rules from the last several years, you don't have to pay anything back of what you previously claimed.
If you did not previously depreciate items that you had before you went into business or that you purchased after you went into business, you can file Form 3115 and claim all the allowable depreciation from past years on your 2012 tax return.
I explain all this in detail in my annual Family Child Care Tax Workbook and Organizer.