Monday, March 23, 2009
Time and Space Percentage...
Tax time is almost upon us and maybe I should review some basic concepts that child care providers need to know about taxes and how they apply to our profession. But first, a disclaimer: I am not a tax expert and if you would like more information, please talk to your tax professional.
Today I want to talk about is the time/space formula. No, I am not talking about quantum physics, but a percentage that is the most important number in a family child care provider's business. The Time-Space Percentage represents the proportion of expenses for items that are used by both your business and your family that you can deduct on your tax return. These expenses include house related costs (property tax, mortgage interest, utilities, house repairs, house insurance, house depreciation, and home improvements) as well as other items such as household supplies, furniture, appliances, shared toys, and so on.These expenses can easily total thousands of dollars so it is vital that providers spend the necessary time to calculate their Time-Space Percentage correctly. This percentage is determined by calculating your Time Percent and then multiplying it by your Space Percent.
The time percent is the number of hours your home is used for business in a years time divided by the total number of hours in a year (8760 hours). Obviously to figure your tiem used for business you count all of the hours children are in your home, from the moment the first child arrives until the last child leaves. But don't forget those hours that you ae performing business activities when children are not present. Include such things as:
NOW we have our time percent... How do we figure the space percent?
That is quite easy... The space percent is the number of square feet of your home regularly used for business divided by the total number of square feet in your home. The living room, dining room, kitchen, bathroom, entryway, playroom, and pantry are obviously regularly used in most providers' businesses. A bedroom used by children for naps for 30 minutes a day is considered regular use. A room doesn't have to be used 10 hours a day before it can be considered regular use. Using a room 2-3 times a week for your business would probably make this room regular use.Children don't have to be in the room for the room to be considered as regular use. A laundry room, storage room, or office can be regularly used for business. Most providers would count their basement as regular use if it contained a furnace area, laundry room, storage area, or playroom. If a basement room contained items used to maintain the home (tools, supplies, food, garden equipment, toys, workshop items, etc.) it can probably be counted as regular use. Don't forget to count your garage as part of the total square feet of the home, even if it is detached from the home if, like most providers, you use your garage on a regular basis for your business as storage for a car, tools, bikes, garbage, recycling, supplies, etc.
Okay, we have our Time Percent and our Space Percent. Just multiply them together! (You can use a calculator if you like...) Now you have your Time-Space Percentage that can be applied to your shared household expenses at tax time.
Tax time is almost upon us and maybe I should review some basic concepts that child care providers need to know about taxes and how they apply to our profession. But first, a disclaimer: I am not a tax expert and if you would like more information, please talk to your tax professional.
Today I want to talk about is the time/space formula. No, I am not talking about quantum physics, but a percentage that is the most important number in a family child care provider's business. The Time-Space Percentage represents the proportion of expenses for items that are used by both your business and your family that you can deduct on your tax return. These expenses include house related costs (property tax, mortgage interest, utilities, house repairs, house insurance, house depreciation, and home improvements) as well as other items such as household supplies, furniture, appliances, shared toys, and so on.These expenses can easily total thousands of dollars so it is vital that providers spend the necessary time to calculate their Time-Space Percentage correctly. This percentage is determined by calculating your Time Percent and then multiplying it by your Space Percent.
The time percent is the number of hours your home is used for business in a years time divided by the total number of hours in a year (8760 hours). Obviously to figure your tiem used for business you count all of the hours children are in your home, from the moment the first child arrives until the last child leaves. But don't forget those hours that you ae performing business activities when children are not present. Include such things as:
- Cleaning your home for your business
- Preparing meals for the children in your care
- Planning and preparing activities for your business
- Keeping business records
- Planning menus and preparing shopping lists
- Conducting interviews with prospective parents
- Talking to parents on the phone about business
- Reading magazines to find recipes
- Working at your computer on business activities (including time on the Internet - child care related only!)
- Any other activity that you do in your home for your business
NOW we have our time percent... How do we figure the space percent?
That is quite easy... The space percent is the number of square feet of your home regularly used for business divided by the total number of square feet in your home. The living room, dining room, kitchen, bathroom, entryway, playroom, and pantry are obviously regularly used in most providers' businesses. A bedroom used by children for naps for 30 minutes a day is considered regular use. A room doesn't have to be used 10 hours a day before it can be considered regular use. Using a room 2-3 times a week for your business would probably make this room regular use.Children don't have to be in the room for the room to be considered as regular use. A laundry room, storage room, or office can be regularly used for business. Most providers would count their basement as regular use if it contained a furnace area, laundry room, storage area, or playroom. If a basement room contained items used to maintain the home (tools, supplies, food, garden equipment, toys, workshop items, etc.) it can probably be counted as regular use. Don't forget to count your garage as part of the total square feet of the home, even if it is detached from the home if, like most providers, you use your garage on a regular basis for your business as storage for a car, tools, bikes, garbage, recycling, supplies, etc.
Okay, we have our Time Percent and our Space Percent. Just multiply them together! (You can use a calculator if you like...) Now you have your Time-Space Percentage that can be applied to your shared household expenses at tax time.
// posted by Tammy Wachter @ 6:54 AM 
