What Hours Can You Count?

As a family child care provider, you can deduct the business portion of thousands of dollars worth of house-related expenses on your tax return.

These expenses include property tax, mortgage interest, rent, utilities, house insurance, house repairs, and house depreciation. You can also deduct the business portion of the cost of items you use for both business and personal purposes: toys, supplies, furniture, appliances, and much more.

The business portion of these expenses is based on a formula called the Time-Space Percentage. The Time percent is based on the number of hours you use your home for your business and the Space percent is based on the number of square feet you use your home on a regular basis for your business.

When calculating your Time percent you can count all the hours children are present in your home (from the moment the first child arrives until the last child leaves) as well as other hours spent on business activities when the children are gone.

At the daycare.com family child care forum, providers recently compiled a list of business activities conducted after children were gone:

Making out a grocery list

Unloading groceries

Cooking, preparing meals

Cleaning up just before children arrive and after children leave

Laundry (washing, drying, folding, putting away)Loading dishwasher (emptying dishwasher)

Online research, webinars, visiting child care forums, and this blog!)

Cleaning toys, rotating toys, putting away and organizing toys

Record keeping, entering data into KidKare software, working on taxes

Baby/child proofing home

Parent interviews

Office work, filing, writing emails to parents, photo copying, writing newsletters, creating and updating your website/blog

Cleaning finger prints off sliding glass doors/windows

Writing contracts and policies

Talking to parents on the phone

Building a business website

Communicating with parents via Facebook

Placing ads on Craigslist and other online classified ad websites

Food Program paperwork

Conducting activities for local family child care association in home

Reading magazines to find recipes

Reading books by Tom Copeland, or reading Tom's blog(!)

Collecting items around the home for craft projects

Planning and preparing children's activities (lesson plans, home decorations)

Decorating playroom for themes and special days

Putting together a daycare scrapbook or photo album

This is not a complete list. You can count hours spent on activities that you would not be doing except for the fact that you are running a business. So, you can count hours spent on putting together a photo album for parents and the children in your care because you would not do this if you weren't in business.

You cannot count hours spent on general housekeeping activities: cleaning out the garage, painting a deck, cleaning out gutters, washing the car, mowing the lawn, remodeling, making house repairs, cleaning a pool, defrosting the freezer, cleaning the oven, cleaning windows, etc..

We don't want to get too aggressive in counting hours on activities that would have done anyway.

When you clean areas that are used for both business and personal purposes, you can count the business portion of the time but not all the time. If it takes you 2 hours to clean the kitchen, bathrooms, and living room on Saturday, don't count all of this as business cleaning time. Instead, estimate the time that it took you to clean these areas because of your business - maybe 1 hour. Don't worry about being precise; the important point is not to count the entire 2 hours.

If you have a separate business freezer, you could count the time to clean it. If you have a separate play room you could count all the time to clean it.

It's not necessary to carefully track these hours every day of the year. Instead, track these hours for two months each year and use the average from these two months for the rest of the year. In fact, if you didn't keep good records so far this year, it's not too late to track these hours for the next month or so and use the average hours per week for the rest of the year.

Then track two more months each year afterwards.Enter all the hours you worked in your home on IRS Form 8829 Expenses for Business Use of Your Home, line 4.

Tracking the hours you work in your home after the children are gone is probably the single most important record keeping task you can perform that will reduce your taxes the most!What other business activities do you perform after children are gone?

Tom Copeland - www.tomcopelandblog.com

Image credit: https://fantasticcleaners.com.au/blog/benefits-regularly-cleaning-home/

For more information, see my book Family Child Care Record Keeping Guide.