It is possible to deduct the household items used for both home and home daycare but you must refer to the "
T/S%" which is your Time/Space Percentage. This the most important calculation for home daycare businesses.
The Time-Space Percentage (T/S%) is the single most important number for a family child care provider to accurately calculate on her tax return. It will make the biggest difference in reducing your taxes. It can be complicated, so make sure you understand how to do it before you enter your figures.
Below is a very helpful explanation by Tom Copeland that I use often for my clients to help them better under T/S%.
The T/S% represents the proportion of your home that is used for business purposes. You will also use it to determine how much of your shared business and personal expenses can be deducted as a business expense. Such expenses include:
House expenses: House depreciation, house improvements, house insurance, house repairs/maintenance, mortgage interest, property tax, utilities (gas, oil, electric, sewer, water, cable television, garbage) and rent.
Shared business and personal expenses: cleaning supplies, land improvements (fence, patio, driveway, underground sprinkler system), personal property depreciation (furniture, appliances, play equipment, television, etc.), toys, yard supplies, and much more.
As you can see, these deductions can amount to thousands and thousands of dollars. That’s why calculating your T/S% correctly is so important!
If an item you purchase is used exclusively for your business you can deduct 100% of the cost. But if it’s also used by your family then you can’t deduct it all. Instead, apply your T/S% to determine your business deduction. Don’t try to deduct 100% of a living room couch. If your own children only play with the item (say a toy) during day care hours, then you can still deduct 100% of the cost.
T/S% Formula
Your T/S% is determined by multiplying your Time percent by your Space percent.
Your Time percent is determined by dividing the number of hours you work in your home for business purposes by the total number of hours in the year. If you worked 11 hours a day (7am-6pm) that represents 2,860 hours a year. Divide this by the total number of hours in the year (8,760) and your Time percent would be 32.6%. You are also entitled to include all hours spent after children are gone doing business activities such as: cleaning, activity or meal preparation, record keeping, parent interviews, even reading my blog! See an upcoming blog post for more information about the Time percent.
Your Space percent is determined by dividing the number of square feet in your home that you use on a regular basis by the total number of square feet in your home. Regular use means you use it for business purposes two or three times a week. If you used 2000 of the 2200 square feet in your home regularly for your business your Space percent would be 90.9%.
If your Time percent is 32.6% and your Space percent is 90.9% your T/S% is 29.63% (32.6% x 90.9%).
