Today TaxMama® hears from sh1207 in the TaxQuips Forum with this question. “In 2011, my wife started a home-run Montessori school in October. We spent about $2,000 in setting up the Montessori (supplies, furniture, license, etc.). We only got $600 in income from one child, who was with us for 3 hrs a day starting October. Can we deduct these expenses and the utilities?”
It sounds as if you’re in business to me. Your doors were open and you had one student.
Hopefully, you’re doing much better by now…a couple of months later. If not, be patient – and be sure to do some marketing and get the word out. Well-run Montessori schools tend to be quite popular, to the point of having waiting lists, in certain communities.
As to the tax issues, there are a lot of deductions you can take.
In fact, there are special ways to deduct the ‘office-in-home’ expenses when you run a school. The deduction is based on a combination of the time used for the school for the shared areas of the house, and the area of the exclusive areas of the house and yard.
If you are going to prepare your own tax return, read the instructions for Form 8829 very carefully. IRS has a special area on their web site for Child Care providers. The tax issues will be similar for home-based schools.
Brigette Thompson developed a record-keeping system that might help you, if Montessori hasn’t provided one. This should help you get started.
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