Our most important number as daycare providers is our "Time-Space Percentage" - the more you can increase that number, the more you can deduct for your taxes, the more money you get back!
For those of you who are new to our world "Time-Space Percentage" is what percent of your home is used for daycare and how many hours are you caring for children vs. your total home space and the hours in the year. I have read somewhere that a time-space percentage to strive for is between 35% - 45%. What that means to you is ANY shared expense - you can claim that percent for your business. Some expenses that fall in your "Time-Space Percentage" are house related costs - property tax, mortgage interest, utilities, house repairs, house insurance, house deprecitation, and home improvements along with other household supplies, furniture, appliances, shared toys and food expenses. What about telephone expenses? If you have one line in your house you can't claim the fee for that first line AT ALL, but you can claim any additional fees related to your phone bill - caller id, call waiting, answering system, repairs, etc. as well as your cell phone, if used for business.
How do I know what "Space" I can use in the formula and what "Space" I can't? Go through your house and ask your self for every room - Do I use this room on a regular basis for my business? If the answer is "yes" then you can use the square feet of that room. If the answer is "no" then you can't count any of that space. Rule of thumb is if the room is used 2 or 3 days a week you can count the space as being used on a regular basis. The space doesn't have to be used 10 hours a day and doesn't even have to have children in it to be counted. Bedrooms used for naptime can be counted, space in basements or rooms that aren't licensed for daycare use can be used for storage and can be counted. My suggestion for all is to try to use AS MUCH OF YOUR HOUSE AS POSSIBLE. Even it is for storing extra supplies in one area, toys in another, nap areas in another, etc. Figure out how you can use as much of your house as possible. A lot of providers do count all the rooms in their house as being used on a regular basis and can claim 100% of your house - don't be afraid to claim 100% as long as you can show the use, if need be.
What hours can I figure into my "Time" portion of the formula? Easy thing to do is figure out how many hours you have daycare children in your home. The time you can figure is from the time the first child is dropped off until the last child is picked up. Then you need to work on figuring up how many hours you work each day and week when you don't have children in care. Please keep in mind that you can't double-dip on your time. You can't claim 10 hours of having kids and 2 hours of working on your business during nap time. You can claim 10 hours of having kids and 1 hour before for prep and 1 hour after for clean up and prep. I don't know about anyone else, but I have a tough time NOT working on my business during nap time. I am programmed to do "business" stuff during "business hours" and "personal" stuff on "personal hours". I am going to strive to be better about using nap time for me and my family. . . write a letter to a distant friend, read a couple chapters in a book, prepare dinner for the evening, fold a load of laundry, pay personal bills, exercise, etc. Then in the evening when I'd be working on personal things I am going to work on my daycare. Prepare on the weekends for the next week, clean up in the evenings after daycare kids have gone, work on classes in my home, interview prep and interviewing, etc. Please keep in mind that you can't count hours where you aren't in your home - library time, grocery shopping, outside classes and seminars, etc. I'm going to challege each of you to change your way of thinking also so you can increase your "time" portion!
What about computer/internet time? If you use your computer and modem (and who doesn't on here) for business use - you can deduct the expense with your time-space percentage. If you are on the internet for business AFTER child care hours you can claim these hours as part of your time-space percentage.