How to Claim House Expenses When You Use Two Homes in One Year

Polly Provider has done child care in her home (#1) for many years. On May 1st, she moves to a new home (#2) where she continues doing child care for the rest of the year. How does she claim expenses for both homes on her tax return?

If you do family child care in more than one home during a year you must file two Form 8829 Expenses for Business Use of Your Home, one for each home. List your expenses for each home on the appropriate form. Put the utilities, property tax, mortgage interest, house insurance, house repairs and house depreciation for January - April on Form 8829 (#1). Put the same corresponding expenses for May - December on Form 8829 (#2). After completing both forms, add together the house expenses for both homes and put the total on Schedule C, line 30.

Time-Space Percentage

You must calculate a separate Time-Space Percentage (T/S%) for each home and then apply this percentage to the separate house expenses for each home. It's possible that you will have a different T/S% for each home.

Enter on line 1 of each Form 8829 the number of square feet of each home that was regularly used for your business. Regular use is approximately 2-3 times per week. If day care children napped in a bedroom each day count the bedroom as regular use even though you didn't use the room for the entire year. You used it on a regular basis while you owned the home for part of the year. It's possible that you could be using 100% of the space in both homes on a regular basis. This is the case with Polly Provider.

Printed on line 5 of Form 8829 is the total number of hours in the year (8,760). Cross out this number on both your Form 8829s and enter the number of hours you occupied each home during the year. In our example Polly would enter 2,880 hours for house #1 which represents the total number of hours from January 1 - April 30. For house #2 Polly would enter 5,880 hours which represents the number of hours from May 1 - December 31.

Enter on line 4 of each Form 8829 the number of hours you spent on business activities in that home. If Polly worked 1,008 hours in home #1 her T/S% would be 35% (1,008 hours divided by 2,880 hours x 100% space). If Polly worked 1,470 hours in home #2 her T/S% for that home would be 25% (1,470 hours divided by 5,880 hours x 100% space). Thus Polly would be deducting 35% of her house expenses for house #1 and 25% for house #2.

Other Shared Expenses

Polly would apply her two different T/S% to other house expenses in each home that are used for both business and personal purposes: cleaning supplies and other household items. How does Polly deduct shared expenses such as toys, activity expenses, furniture, appliances, etc. that she used in both homes?

She must calculate an average of her two T/S%. Multiply the T/S% for each house by the number of months the home was in business use. Add the two totals together and divide by 12. So, Polly would multiply 35% for house #1 by 4 months = 140%. She would multiply 25% for house #2 by 8 months = 200%. 140% + 200% = 340% divided by 12 months = 28%. She would use a 28% T/S% on all her shared expenses that were used in both houses.

Is all this really that complicated? Afraid so. But if you pay close attention you will claim the proper business deductions. And because you have thousands and thousands of dollars of house expenses this work is well worthwhile.

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