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Daycare and Taxes All things related to Taxes and running a Daycare post here. Topics of tax exemptions, forms, filings, tax write offs, IRS etc.

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  #1  
Old 10-18-2010, 06:11 AM
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Default Time Space Percentage Question?

What is the equation for finding this out?

Also I have another question, I live in a split level house and I have only been using my upstairs level floor for daycare and use all of the square footage on this level! However I have TONS of outside toys in our garage, basically takes up and entire garage stall, I have hooks in my entry way where all of the kids hang their coats and leave their shoes? I shuffle my toys in and out, rotate them ever so often and all of the toys that are NOT being used at a certain time pretty much fill my unfinished basement, we also walk through my unfinished basement to get to our backyard, but never play down there as it isn't finished! So my question is can I write off all of this square footage/ my entire house as being used for daycare, since no matter where you look in this house their is daycare things?!

Also we are in the middle of finishing our basement, my hubby is doing it in his spare time, so a little bit here and a little bit there! However, he told me that he is going to race the baby, in which is due in 63 days! I told him Good Luck! LOL So I was wondering if all of the stuff we are buying to finish the basement is something I can be writing off and how I do so?
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Old 10-18-2010, 06:27 AM
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K so I found the time space percentage equation, but need help in understading it:
# hours home # square footage of home
used for buisness used regularly for buisness
_______________ X _______________________ =Time Space Percentage

Total # hours in Total # square feet in home
a year

Okay, so now is the # hours home used for buisness the total numbers at the end of the year, my total # of hours worked in daycare divided by 8766 hours which is the total # hours in a year?

Then I need to know about the second part of the equation once I figure out what square footage I can be using for daycare, like does it include, my unfinished basement, my entry way, my garage - basically my Total # of square feet of my home and then divide that by the total # square feet in home?


Time Percent equation on Buisness:

# hours home used for buisness
__________________________ = Time Percent
Total # hours in a year


So I take my total buisness hours at the end of the year and divide it by 8766 hours?

So when you want to figure out the extra hours you spend outside of buisness hours how do you do this, do you do it like this:

Time Percent equation outside of Buisness:

# hours spent outside of buisness, but on buisness
__________________________________________ = Time Percent
Total # hours in a year

and then do you add these two total percents to get your total Time Percent for the year?

Sorry for all of the questions I am just trying to get it all figured out and do it the right way, but get the most of out it!! Thanks Megan
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Old 10-18-2010, 06:48 AM
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Quote:
What is the equation for finding this out?
The equation to finding your time/space% is like this:

Take your (A) number of business hours worked (the number of hours that you were in your home taking care of kids & the hours that you spent in your home doing business things before the kids arrived and after the kids went home) devided by (B) number of hours in a year (8,760) = (C) Your time %

(D) # of sq. ft. you use your home for business devided by (E)the total number of square feet in your home = (F) Your space %

Then multiply your (C) time % by (F) your space % = your time/space %


Quote:
I have only been using my upstairs level floor for daycare and use all of the square footage on this level! However I have TONS of outside toys in our garage, basically takes up and entire garage stall, I have hooks in my entry way where all of the kids hang their coats and leave their shoes? I shuffle my toys in and out, rotate them ever so often and all of the toys that are NOT being used at a certain time pretty much fill my unfinished basement, we also walk through my unfinished basement to get to our backyard, but never play down there as it isn't finished! So my question is can I write off all of this square footage/ my entire house as being used for daycare, since no matter where you look in this house their is daycare things?!
Any space that you use for any reason that has something to do with daycare can by used towards your space %. For example, if you use your kitchen to prepare meals, dining room to serve meals, living room as playspace, bathrooms are open for the DC kids, you have your computer in your bedroom and use it for record keeping for your business, store toys in the garage, wash DC blankets/toys in your laundry room and have a storage shed in your backyard that you also keep toys in, all of this counts and so needs to be measured. It doesn't matter whether or not your DC kids use it, it's whether or not you use the space for business.

Quote:
Also we are in the middle of finishing our basement, my hubby is doing it in his spare time, so a little bit here and a little bit there!
Don't forget to keep track of the time that you spend in your home doing business related activities, this includes your family. Keep a log as to the hours that he works on the space (when there are no kids at your DC). These hours and any hours you spend setting up before your DC kids arrive and the hours you spend cleaning up after the DC kids leave. Add these hours to the number of hours that you cared for DC kids. It will give you a higher time%.

Quote:
So I was wondering if all of the stuff we are buying to finish the basement is something I can be writing off and how I do so?
As long as you are already doing business or are ready to do business at least a portion of your cost for materials should be deductible. There's a lot of rules when it comes to home improvements so I would ask your tax preparer or get the Family Childcare Record-Keeping Guide by Tom Copeland. Just be sure to keep each and every receipt.

P.S. Keep in mind that if this space is going to be used only for DC and never for personal uses (it will be restricted from your family before or after daycare hours) then the entire space can be added as 100% business use which will make your space % even higher.
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Old 10-18-2010, 07:11 AM
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Okay, so now is the # hours home used for buisness the total numbers at the end of the year, my total # of hours worked in daycare divided by 8766 hours which is the total # hours in a year?
Yes but you add the total numbers you worked watching children PLUS the hours you spent doing business related things when the kids are not in your care. Example: Your hours are 6am-6pm but your first child arrives at 7:30am and leaves at 4:30 pm, your second child arrives at 9:00am and leaves at 5pm. Your had kids in your DC from 7:30am to 5pm so you worked 9 1/2 hours this day. But you started setting up the activities in the morning from 7am to 7:30am and after the last child left you cleaned up after them and spent an hour, this is time spent doing business related things and you would add this hour and a half to your hours worked making it 11 hours that you worked this day (make sure you keep logs of the time you worked when kids weren't in your care and sign-in sheets for your DC kids in case you get audited, you need to be able to prove that you did these things).

Quote:
So I take my total buisness hours at the end of the year and divide it by 8766 hours?
Yes, this give you your time %.

Quote:
# hours spent outside of buisness, but on buisness
Just to make it clear, you can't claim time you spend out of your home doing business related things (shopping for groceries, training etc). For these you track the mileage but can't claim the time. You can only claim the time you spend working in your home doing business related things.

Quote:
and then do you add these two total percents to get your total Time Percent for the year?
No not the percents, you add the hours. # of hours you took care of kids PLUS # of hours you spent doing business related things in your home when there were no DC kids THEN you divide that total by the total number of hours in a year (8,760) which gives you your time %.
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  #5  
Old 10-18-2010, 07:24 AM
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Default Time-Space %

You can count any room you use on a "regular" basis as business use when calculating your space %. I would define regular use as 3-4 times a week. But this is a rough rule of thumb. Last year the IRS Child Care Audit Guide said that you must include the space of your basement and garage as part of the total square feet of your home. Most provider could say they use these spaces on a regular basis in their business because of storage, laundry room, furnace area, tools, bicycles, garbage can, etc.
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Old 10-18-2010, 08:35 AM
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Boy, just reading all this makes me glad I have a CPA that does my taxes!!! I just enter stuff into excel, give her the sheet and let her do the work.
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Old 10-18-2010, 08:37 AM
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one of the best parts of havin a small house is i can claim all parts of it
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Old 10-18-2010, 08:42 AM
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Originally Posted by BentleysBands View Post
one of the best parts of havin a small house is i can claim all parts of it

Me too! I have a 1400 sq ft, 2 bdrm, 1 bath, 1 den, 1 kitchen and 1 laundry room. I use them all every day! Have 3 kids sleeping in one room and one kid sleeping in the other.

Considering I've taken in around $10,000 this year, spent $2300, average 175 -200 hours a month and can take off a portion of all the utilities and phone, and a portion of the entire hours......I'm hoping not to owe in taxes this first year.
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Old 10-18-2010, 09:22 AM
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so I can claim my basement even though the kids don't ever go down there?
I do store toys and crafts down there.
I do laundry down there (but such a little amount of laundry is daycare related)
and my woodstove is down there (which I need to keep going all winter to heat the entire house)
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Old 10-18-2010, 09:51 AM
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lol,.. ME TOO! one potty 3 small bedrooms,.. and a living and kitchen,... yep EVERY square inch has dc stuff or business done in it. lol.


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one of the best parts of havin a small house is i can claim all parts of it
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Old 10-18-2010, 10:18 AM
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I can claim every room in my house but my husbands office because there was NOTHING daycare related in there at all..SO I moved my printer from my office to his Now I can claim his room too! Sometimes you just have to get creative! If you have rooms with no dc stuff in them, just move stuff!!
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Old 10-18-2010, 11:00 AM
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Okay, so reading through all of this and a huge shout out to MarinaVanessa for all of her help and info - she definately has her stuff together, THANKS!! I have come to the conclusion that I can write off ALL of the sq footage in my house and haven't been thus far! Oh well, better to start now than never!! I have one more question however, I have 3 bedrooms and obviously one is my husband and mine and then I have two daughters who share a room - their decision, but works out well for daycare! So that leaves one empty room , empty meaning noone from my family uses it! I have 2-3 kids who nap in there and the rest of the room is filled with toys!! I would say this room would count 100% as daycare, correct? Obviously once I have the new baby - it will turn into the babies room, but for the last 1.5 years it has solely been used for daycare! So the sq footage of my house per level is 1500, so with the unfinished basement added to that I have 3000 sq footage, in which I still need to add the garage into that, right? Then how do I configure a room that I solely use for daycare - 100% of the time?
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Old 10-18-2010, 02:23 PM
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Default Time-Space %

Quote:
Originally Posted by sbschildcare View Post
so I can claim my basement even though the kids don't ever go down there?
I do store toys and crafts down there.
I do laundry down there (but such a little amount of laundry is daycare related)
and my woodstove is down there (which I need to keep going all winter to heat the entire house)
Yes, count your basement area as regularly used for your business if you store toys and crafts, do laundry and have a furnace area. You can count the basement as regular use for your business even if day care children are not allowed to go into the basement because you don't have the proper exits. It's not who is in the room that makes it regular use, it's how the room is used.
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Old 10-18-2010, 02:28 PM
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Default Exclusive Use room

Quote:
Originally Posted by JJPlaycare View Post
Okay, so reading through all of this and a huge shout out to MarinaVanessa for all of her help and info - she definately has her stuff together, THANKS!! I have come to the conclusion that I can write off ALL of the sq footage in my house and haven't been thus far! Oh well, better to start now than never!! I have one more question however, I have 3 bedrooms and obviously one is my husband and mine and then I have two daughters who share a room - their decision, but works out well for daycare! So that leaves one empty room , empty meaning noone from my family uses it! I have 2-3 kids who nap in there and the rest of the room is filled with toys!! I would say this room would count 100% as daycare, correct? Obviously once I have the new baby - it will turn into the babies room, but for the last 1.5 years it has solely been used for daycare! So the sq footage of my house per level is 1500, so with the unfinished basement added to that I have 3000 sq footage, in which I still need to add the garage into that, right? Then how do I configure a room that I solely use for daycare - 100% of the time?
I wrote a handout on how to calculate your Time-Space % when you have an exclusive business use room (http://www.nafcc.org/documents/busin...Percentage.pdf). Basically, you are calculating a time-space% for the exclusive use area, and then another time-space % for the regular use areas. Then add the two percentages together.

In your case you would have to count the basement and the garage as part of the total square feet of your home. If you give me the square feet of your garage and your time% I'll tell you what your time-space% is.
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Old 10-18-2010, 03:15 PM
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Originally Posted by TomCopeland View Post
In your case you would have to count the basement and the garage as part of the total square feet of your home. If you give me the square feet of your garage and your time% I'll tell you what your time-space% is.
Thank you Tom, what would we providers do without you .
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Old 08-26-2011, 12:58 PM
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ok I am confused can someone help me. Here is my info. So far I've worked 1793 hours. The sq ft I can count is 1850 and I use all of it. What would the answer be?
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Old 08-27-2011, 03:01 PM
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Default Time-Space %

Your t/s% so far this year is:
1,793 hours worked Jan 1-Aug 26 divided by 5,712 (total number of hours Jan 1-Aug 26) = 31.3% x 100% space = 31.3%
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Old 08-27-2011, 04:51 PM
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Originally Posted by TomCopeland View Post
Your t/s% so far this year is:
1,793 hours worked Jan 1-Aug 26 divided by 5,712 (total number of hours Jan 1-Aug 26) = 31.3% x 100% space = 31.3%
Ok I get it, now do I divide 31.3% into the total cost of say my electric bill for the year so far?
Thanks for helping me.
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Old 08-28-2011, 03:52 PM
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Default Time-Space %

You don't have to worry about what your time-space % is until the end of the year. Whatever your t/s% is at the end of the year is the number you will use to determine how much you can deduct on your taxes. So, if your t/s% is 31.3% at the end of the year, and your utility bills were $2,000 for the year, then you could deduct $626 ($2,000 x 31.3%).
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