One of the most important record keeping tasks a family child care provider can perform is to keep track of all the hours she is working for her business.
These hours are used to help calculate your Time-Space Percentage which determine how much of your house expenses you can claim as a business deduction.
Your house expenses include: property tax, mortgage interest, house insurance, utilities, house repairs, and house depreciation. These expenses represent thousands of dollars, so even a small increase in your Time-Space Percentage can make a big difference on your taxes.
You can count all hours you spend caring for children in your home. This includes time spent in your front or back yard with the children.
You can also count all hours spent on business activities in your home when children are not present. This includes hours spent cleaning (inside and outdoors), activity preparation, meal preparation, record keeping, reading this blog, and so on. These hours can only be counted if you would not otherwise be doing them if you weren’t in business.
But, what about hours you spend on business activities away from your home?
Unfortunately, you cannot count such hours.
You can’t count these hours even if you are doing business activities such as attending a child care workshop, shopping for toys for the children, or picking up children in the morning or transporting them home at the end of the day.
The reason for this is simple. When you are away from your home you are not “using” your home. You are not wearing out your carpets, using furniture or appliances, or using your utilities for business purposes. Yes, you are still using electricity and gas while you are away from your home, but not for your business. Your home is considered personal use at all times unless you can show it is specifically used for your business.
Since your Time-Space Percentage is used to determine how much of your house expenses you can deduct, it makes sense not to be able to count hours when you aren’t using your home for your business.
What about counting hours when you take a field trip in the middle of the day and then return home with the children? The IRS has never addressed this in any publication and in 30 years I have never seen them asking about this in IRS audits. Therefore, I wouldn’t subtract hours for field trips. So, if you care for children from 6:00am to 6:00pm and take children to the park from 11:00am to noon, count 12 hours for that day as using your home for your business.
Tom Copeland – www.tomcopelandblog.com
Image credit: activerain.com
For more information on how to calculate your Time-Space Percentage, see chapter 3 in my book Family Child Care Record Keeping Guide.