If you run a family child care business in your home, Form 8829 asks what share of the home's costs belongs to the business. For a daycare that share depends on two things: how much of the home the daycare uses, and for how much of the year. Publication 587 calls the result the Time-Space percentage. This page works through one example home from start to finish.
Shared rooms count only if you have applied for, been granted, or are exempt from a daycare license, certification or registration.
1. The home and its rooms
The example home is 1,800 sq ft. The daycare uses five areas regularly. Only the converted garage playroom is used for nothing but the daycare, so it is the one exclusive room.
| Room | Sq ft |
|---|---|
| Playroom (converted garage), exclusive | 400 |
| Living room, shared | 350 |
| Kitchen, shared | 200 |
| Hall bathroom, shared | 60 |
| Nap room, shared | 150 |
Exclusive space is 400 / 1,800 = 22.22%. Shared space is 760 / 1,800 = 42.22%.
2. The hours
The daycare is open 64.5 hours a week for 50 weeks, plus 20 hours outside the usual pattern. That is 64.5 × 50 + 20 = 3,245 hours. A full year has 365 × 24 = 8,760 hours.
Time % is 3,245 / 8,760 = 37.04%.
Many providers also count prep, cleaning and record-keeping done at home without children. Publication 587 does not spell this out, so keep a written log if you include those hours.
3. Putting it together
The exclusive room counts in full. The shared rooms count only for the share of time the daycare uses them.
22.22% + (42.22% × 37.04%) = 22.22% + 15.64% = 37.86% Time-Space
That is the percentage applied to shared home costs such as mortgage interest, utilities and insurance on Form 8829. Costs only the daycare uses, such as a repair to the playroom door, are not reduced.
4. The simplified method, for comparison
Instead of tracking actual home costs, the simplified method allows $5 per sq ft for up to 300 sq ft. When the daycare uses space regularly but not exclusively, the $5 rate is reduced by the Time %. This home has 400 sq ft of exclusive space, so it gets the full rate: 300 × $5 = $1,500, as long as that is not more than the gross income from the business use of the home. Work out both methods before you choose one for the year.
Do it with your own numbers
The free calculator does the same arithmetic in your browser. The $19 bundle adds an expense tracker, tuition statements for parents and a meal log, in Google Sheets and Excel.
Open the free Time-Space calculator Home Daycare Bookkeeping Bundle ($19)This is a record-keeping guide, not tax advice. Check IRS Publication 587 for the year you are filing or ask a tax professional.
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