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