How to Calculate Your Time-Space Percentage Before the Year is Over

6a0133f3fc5805970b01b8d078400e970c-320wiYour Time-Space Percentage is used to determine how much of the cost of items used for both business and personal purposes can be deducted as a business expense.

You won’t know what your percentage will be until the end of the year because it’s based on the hours you work over the entire year.

However, there are times where you may want to know what your percentage is before the year is over. You may want to use i:

* To determine what your business profit is year-to-date

* To see if you qualify for the higher Tier I Food Program reimbursement rate

* To apply for a loan; or

* To help with budget planning.

If you use the Minute Menu Kids Pro software, calculate your Time Percent by using your hours from Attendance Records, not your hours from Hours of Operation (See the Time-Space Percentage tab).

If you choose your Hours of Operation, the software will count all the hours you are open for a month, on the first day of the month. This will inflate your Time Percent until the last day of the month. At the end of the year, the calculation will be correct using either method.

If you don’t have this software, use last year’s Time-Space Percentage as an estimate for this year.

If you weren’t in business last year and have no idea what your Time-Space Percentage is, follow these short steps:

Step one: Estimate the average number of hours in a week you care for children in your home. Add to this another 10 hours a week, representing the number of hours you care doing other business activities when children are not present (cleaning, activity preparation, meal preparation, record keeping, etc.).

If you care for children 11 hours a day x 5 days a week = 55 hours per week + 10 extra hours per week = 65 hours per week. There are 168 hours in a week. 65 hours divided by 168 hours = 39% Time. This is an estimate. Your percentage will vary based on your work schedule.

Step two: Identify the rooms in your home that are regularly used for your business. Regular use means a room is used at least two-three times per week for business purposes. You can count laundry rooms, office, and other rooms that children don’t enter, but you use for business purposes. Include your basement and garage if they are used regularly. Add up the square feet of these regularly used rooms. Divide this number by the total number of square feet in your home.

Here’s an example:  You use all the rooms in your home on a regular basis except your own bedroom and your own child’s bedroom. If the square footage of these two rooms is 350 and the total square feet of your home (including your basement and garage) is 2,000, then the business square footage is 1,650 (2,000 – 350 = 1,650). 1,650 divided by 2,000 = 82.5% Space

Step three: Multiply step one by step two. 39% Time x 82.5% Space = 32%. This is your estimated Time-Space Percentage.

Many providers use all of the rooms in their home on a regular basis. If so, your Space Percent would be 100% x 39% Time = 39% Time-Space Percentage.

Most providers have a Time-Space Percentage of between 30% and 40%. Yours may be higher or lower.

Note: If you have rooms that are exclusively used for your business, you will calculate your Time-Space Percentage differently. See my article “How to Claim The Exclusive Use Rule.”

Tom Copeland – www.tomcopelandblog.com

Image credit: health.discovery.com

Record Keeping smallFor more information on calculating your Time-Space Percentage, see my book Family Child Care Record Keeping Guide (9th edition).



Categories: Record Keeping & Taxes, Time-Space Percentage

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7 replies

  1. I only had my child care for 9 months. I started in March 2016. Do I divide my hours worked by the total in a year or the total in those 9 months?

  2. Tom,
    I’m not sure my TSP was calculated correctly last year. It was 37%, but I calculated it at 53%. This is what my tax preparer said in response. Is he correct?
    “I think the calculation was correct. The reason it was less than the 53% was the daycare was only operated 7 months. The calculation takes this into account and comes up with a lower percentage that we take against the full years worth of expenses. If I would have had a full year of operation the calculation does come out to 53% roughly.”
    Rosie

    • You can either claim the higher time space % and apply it to 7 months of house expenses or claim the lower time-space % and apply it to 12 months of house expenses. In my opinion, it’s better to claim the higher time space % because then you get a higher deduction for non house expenses such as household supplies, depreciation on furniture, appliances, etc. and so on. It may not make a big difference which method you use.

  3. Can I claim some square footage in my crawl space? If so do I just add the square footage of my crawl spaced (used) to to overall square footage of the house? I have toys and baby things stored in my garage, shed and crawl space. I’m just trying to figure out how to claim as much as possible for space used for the business, TIA! 🙂

  4. I would only count rooms when calculating your time-space%. Is a crawl space a room? I would say no. If you can’t stand up in it it’s not a room. You must count the garage as part of your home and can probably count it as regular use space. Only count a shed as part of your home if it’s permanently connected to the land.

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