Truth is, deducting some portion of your home as business expenditure is an extremely difficult process to do since this is normally being challenged by the IRS. Among the aspects being determined by the IRS in order to assess that a certain house can be employed as a business expense is the fact that a certain room within the house is “entirely and solely” employed for the business purpose only. This is something that is very difficult for every homeowner to establish.
But you should not fret a lot since the IRS gave an exception to this annoying rule which lead home day care providers to be able to look for means which will give them the ability to easily deduct a part of the house as a home office despite the fact that the room is not exclusively for day care purposes only. For instance, a room can be employed as a living room during night time and it can also be employed as a playroom by day. In case the day care is operated regularly then this room can now be regarded as a business/personal environment.
If you are wondering how exactly you will be able to calculate the amount of home expenses that will be deducted as a business expense then this is through the time/space percentage wherein time is multiplied by the area of the house which is employed for the operation of the business. You could include the area which is used as a place to keep children’s toys or wash your clothes in order to deduct the portion used in your day care business.
Furthermore, taxes and mortgage interest are deductible if only you are able to effectively itemize your deductions. Some of the other expenses that would give you the ability to lessen your tax would comprise of utilities, insurance premiums, condo fees, and business telephone lines.
There are other questions that you should bring up when talking to your tax advisor so you would be guided properly in terms of tax exemptions issues. Be sensitive about every aspect of your business so you would be guided well. As much as possible, be organized with every aspect of your business. Keep receipt at the right place so you could show them right ahead when the time comes when your accountant is in need of them.
Moreover, you should ensure the credibility of your accountant. Go for those who possess a good experience and background when it comes to business exemptions rather than an eager novice, because the former will give you more chance to obtain tax deductions. You can also ask around from your fellow home day care owners so you would understand their claims and for you to be able to assess how your business is working. Also, it would help a lot if you can have the necessary information about tax deduction by your own. Attend seminars and lectures about the subject for better understanding.
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