What do we mean by Time Percent?
This percent is determined by adding up the number of hours you are using your home for business purposes and dividing this number by the total number of hours in the year (8,760). There are two types of hours to include: hours when day care children are present in your home and hours when children are not present but you are engaged in business activities.
Hours when children are present in your home
Count hours from the moment the first child arrives until the last child leaves. Don’t count the hours of operation as reflected in your contract; instead keep records of the actual hours children are present. If you care for children from 7 am to 5:30 pm that’s ten and a half hours a day or 31% of the week. If your pick up time is 5:30 pm but the last parent usually leaves closer to 6:00 pm count this extra time. A half hour a day every day is equal to 1.5% of the year, which is significant when applied to all your house expenses.
Hours when children are not present in your home
Count all hours spent on business activities such as: cleaning, meal preparation, activity preparation, record keeping, parent interviews, parent phone calls, time spent on the Internet, and so on. Such activities may be done by your spouse (cleaning toys) or by your own children (laundry). Don’t count time spent away from your home, even if you are engaged in a business activity (training workshop, transporting day care children).
Tracking your hours
Keeping track of your attendance hours is relatively simple; tracking the hours you work when children are gone requires more effort. Try to keep a daily record of all the hours you work when children are gone for at least two months each year. Use the average hours worked for these two months for the rest of the year. Mark this time on a calendar and note what time of day you did the work.
Carefully tracking the hours you work after children are gone is perhaps the most important thing you can do to reduce your taxes. Most child care providers underestimate these hours and pay higher taxes as a result. Every one and a half hours of work each week is equal to a rise of about 1% in your Time-Space Percentage. Although this might seem a small amount it’s not when applied to thousands of dollars of house expenses.
The average amount of time providers care for children is about eleven hours a day, five days a week. This is equal to 33% of the year. The average amount of time child care providers conduct business activities after the children are gone is about 14 hours a week, or about 8% of the year. Therefore, a typical child care provider’s Time Percent is around 40%. Yours may be higher or lower.
It’s time for a pop quiz on the T/S%!
- Do you have to include your basement and garage in the total square feet of your home? Answer
- Can you count the hours you spend at a workshop on child development sponsored by your local Child Care Resource and Referral Agency at their office in your Time percent? Answer
- Can you count the square footage of your outdoor play area in your Space percent? Answer
- Must you recalculate your T/S% each year? Answer
For additional information, please feel free to download our Tax & Recordkeeping Guide Book.
Source: Tom Copeland Blog