Here are some real examples of damage caused by children as reported on Daycare.com:
* A child puts a plum down the toilet which backs up and leaks through the bathroom floor. The sub floor and ceiling in the basement had to be replaced.
* A child punches a hole in the living room wall.
* A child shoves sticks and stones into the outdoor air conditioning unit that must be replaced.
* A child takes a metal fork and scratches the top of a new dining room table.
Children have broken the door off a dishwasher, broken windows, damaged sprinkler heads, wrecked carpet, destroyed toys, and so on.
Probably the most commonly reported damaged property was the front screen door. One provider reported having to replace it five times!
Sometimes it's the parents who cause the damage: backing out of the driveway and driving over a new mailbox.
The cost to repair or replace these items can be hundreds of dollars.
Sometimes parents will volunteer to pay for all or part of the damage caused by their child, particularly when it was done deliberately. The parent's homeowners insurance may provide coverage in these situations.
Most providers consider property damage to be part of the cost of doing business and don't seek reimbursement from parents.
What are the tax consequences?
If a child damages a toy or item that you have already deducted, you can't claim any additional deductions for that item.
If you replace an item that you are still depreciating (carpet, dishwasher, etc.) you can claim all remaining depreciation in the year you replace it.
If a parent pays to replace something, you can deduct 100% of the cost of the item. Report the money you receive as income and deduct the 100% of the cost of the new item.
If you pay to repair the item, deduct 100% of the cost of the repair.
If you pay to replace the item (screen door, carpeting, new dishwasher, etc.) You must depreciate the item if it cost more than $500. Use your Time-Space Percentage if you use the replaced item for both your business and your family.
If you or your own child destroys something used in your business and by your family, deduct your Time-Space Percentage of the cost of the repair or replacement.
I wish this was simpler, but it's not!
Tom Copeland - www.tomcopelandblog.com
Image credit: https://www.flickr.com/photos/quesarahsarah/