Time Space Allocation

A. The time-space percentage is probably the most critical computation for calculating deductions for the child care business! Providers who are required to be licensed under the rules of the State, but are not licensed may not deduct expenses for the business use of their home.

B. The formula used to calculate the time-space percentage is as follows:

Number hours home used in business / Total number hours in year X Number square feed of home used in business / Total number square feet in home = Time Space Allocation

Example: Provider is open for childcare Monday through Friday 7 a.m. to 5 p.m. She does all the cleaning and preparations during her “open” hours (imagine that!). Her home is 2,400 square feet. She uses the entire home for the child care business, except for two bedrooms, which total 300 square feet. Her time space allocation is 26.16%, calculated as follows:

2500 (hours used) / 8760 (hrs in yr) X 2200 (sq. ft. used) / 2400 (tot sq ft) = .2616

C. This formula used to allocate the business portion of shared and personal expenses including:

  • House repairs and maintenance
  • House depreciation
  • Property tax
  • Mortgage interest
  • Utilities
  • House insurance
  • Major home improvements
  • Personal property depreciation (excluding computer, TV, VCR, radio, tape recorder, piano, etc.)
  • Land improvements

D. Hours of business to be included in the calculation include hours spent in the following activities:

  • Caring for children, from when the first child arrives until the last child leaves.
  • Cleaning up the house for the business before and after the children are present.
  • Cooking for the children in care.
  • Preparing activities for the children.
  • Interviewing prospective parents.
  • Talking to parents on the phone.
  • Keeping business records and preparing tax returns.
  • Meal planning and preparing shopping lists for the business.
  • Filling out paperwork for the child care food program.
  • Spending time on the internet for business purposes

E. Note: You may not include the same hours twice (e.g. if you make up shopping lists while caring for children, you count that hour only once); hours spent away from home in activities such as shopping or transporting children are not counted.

F. How to keep records of hours used for business

  • Save your contract or other record that describes your normal workday hours.
  • Use a calendar to track business hours in addition to regular hours of operation.

G. Calculating the square feet used in the business:

  • List each room in your home and measure the square feet in each room; if a room is available for day care use for the entire day and is used for child-care on a regular basis, count the square feet of that room as being used for business. For example, if a bedroom is used for morning and afternoon naps for two hours each day, the room is counted as used for child-care business for the day.
  • Day care children need not be present in a room for it to be used regularly for the business (e.g. storage, laundry).
  • You may not include any area of the home where the children are restricted, even if the room is used occasionally for naps.
  • The square footage of the garage should be included in the total square footage of the home. If the garage is used for child-care, e.g. for storage of toys and supplies, the square footage would be counted as business use.
  • Special computations are used if there is an area of the home that is used solely and exclusively for the child care business at all times. This applies only if the area of the home is never used for personal purposes outside of the day care operation.

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