Depreciating household items can represent a significant tax savings!
We always meet with our new child care provider clients to check their past deductions because many times they have not properly depreciated the day-to-day materials, furniture, and household items they use in the daily operation of their business.
We want to know about these items – even if they were purchased before the business was started. These can result in considerable tax savings for you.
It’s true! You are entitled to claim depreciation on household items that you purchased BEFORE your business was even started. In fact, you should depreciate all the items based on the lower end of the purchase price (your tax preparer will guide you) or the of the item(s) when they were first used in your business.
The list can include: beds, linens, towels, tables, chairs, desks, refrigerator, freezer, washer/dryer … are you getting the picture. Any of the items that you are using in support of your child care business is a legitimate deduction. This includes little stuff too, like pictures on the wall, garden hose, tools (for use outside).
The IRS Child Care Provider Audit Technique Guide states, “For many providers, when they start their business many items that were personal use only are used in the business. They are entitled to depreciate the business use portion of those assets.”