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Daycare and Taxes>I Must File A 8829?
tuffthegamer 08:45 AM 02-19-2011
I just want to make sure I understand this. I must (and I mean its required no matter what) file a 8829 for the use of our house. So that means I have to expense part of my mortgage interest/real estate taxes also. I will not be able to take my full taxes/interest on schedule A?

I understand I have to do the 8829 for expensing my utilities, but, I thought I didn't have to take any of the mortgage interest and stuff on 8829 as a daycare expense.

I am hoping I am asking this correctly.
care-care 08:31 PM 02-20-2011
I think Tom will chime and tell you what to do but if i remeber right your t/s percent of it goes on the 8829 and the rest on your schedule a so i believe it helps your self employment tax be lowered. u still ded all of it just on 2 forms. split. but tom will let u know if i am not right lol. maybe ive learned one thing about taxes now..
Michael 09:25 PM 02-20-2011
Here are some earlier post on Form 8829:
TomCopeland 09:35 PM 02-20-2011
Not only must you fill out Form 8829 when you care for children in your home, you want to. Yes, you will now be claiming less property tax and mortgage interest on Schedule A, but deductions on Form 8829 are worth more to you than deductions on Schedule A. This is because you are paying higher social security taxes on child care income than just federal income tax.

So if your time-space % is 40%, you will deduct 40% of these expenses on 8829 and 60% on Schedule A.

Join me for my webinar February 28th on "How to Reduce Your Taxes for 2010 and 2011" sponsored by For more info:
tuffthegamer 06:50 AM 02-21-2011
Ok , I think I need to ask this differently.

I understand I must, it is a requirement, I have to no matter what file a 8829. Now, "must" I take my mortgage interest as an expense?

My wife does not have that many kids , so, it would be more beneficial for me to take all the mortgage interest as a itemized deduction on schedule A than splitting it out.
TomCopeland 08:21 AM 02-21-2011
I guess I'm not making myself clear. You must take mortgage interest and property tax on Form 8829. And this is a good thing! You must split these two expenses between Form 8829 and Schedule A. Whether your wife shows a profit or not, these two expenses get transferred from 8829 to Schedule C.

Let's say your wife had a profit of $3,000 and the business portion of these two expenses was $2,000. Your wife now has a profit of $1,000. She pays 15% social security tax on her profit. You just saved $300 in taxes by claiming these two expenses. Unless your personal tax bracket is more than 30% you came out ahead.

If your wife has a loss of $1,000 then the $2,000 increases her loss to $3,000. This loss gets transferred to your Form 1040 and reduces your federal and state income by $3,000. In this case you get the same benefit of the $2,000 on 8829 as you would have gotten on Schedule A because they are both reducing your federal and state income by the same amount.
tuffthegamer 08:42 AM 02-21-2011
Ok that makes sense. I understand what you are saying.

I was just trying to find out if I have to, like its required by law I have to take the mortgage interest on the 8829.

Also, the other problem I have is, my wife started the day care last october 2010 but we did not get any kids until 2011. So no income, all startup expenses, so, should I still do the 8829 even though the house wasn't really used until 2011?

Thanks for your help, I really appreciate everyones input.
TomCopeland 09:55 AM 02-21-2011
Your business when you are ready to care for children and are telling others you are ready. So if you were advertising for child care to be delivered in 2010 then your wife was in business in 2010 and you should file Form 8829. If this is the case, your time-space % will be extremely low because the hours would be so low. It's also possible that you didn't use any rooms in your home on a regular basis in 2010 so your time-space % would be zero. In this case you would be able to claim 100% of your property tax and mortgage interest on Schedule A.

If you weren't ready to care for children in 2010 or didn't advertise in 2010 then your business began in 2011 and you can't claim any business expenses in 2010. Carry them over to 2011. You wouldn't fill out Form 8829 for 2010 in this case and would claim 100% of the property tax and mortgage interest on Schedule A.
Tags:form 8829, taxes, tom copeland
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