How to Calculate Your Time-Space Percentage (Step by Step, With Examples)
Learn how to calculate your time-space percentage for home daycare taxes, step by step, with a simple worked example and the IRS rules in plain words.
Read this guideHome Daycare Expenses List: 45+ Costs Providers Can Deduct
Many providers miss deductions simply because they do not know a cost counts. Use this list to check your spending, save the right receipts, and stop leaving money on the table at tax time.
How daycare deductions work, in plain words
A deduction is a business cost that lowers the income you pay tax on. Daycare costs fall into two groups. Costs used only for your daycare, like toys and children's food, can usually be deducted in full, at 100 percent.
Costs you share with your family, like rent, utilities, and home repairs, are deducted using your time-space percentage. That is the share of your home and time used for business. You can find yours in minutes with the Time-Space Percentage Calculator.
Good to know: Rules in this article are general federal tax information, not personal tax advice.
Food and kitchen costs
Food is one of the biggest costs in a daycare home, and it is deductible. You can track what you really spent on food for the children, or you can use the IRS standard meal rates, which are set amounts per meal and snack. Many providers find the standard rates easier and often higher than their real grocery bills.
- Food and drinks served to daycare children
- Paper plates, cups, napkins, and child-size utensils
- A second refrigerator or freezer used for daycare food
- Kitchen cleaning supplies used for daycare meals
Toys, learning, and supplies
Almost everything you buy so children can play, learn, and stay clean is a business cost. Keep receipts, even for small buys at discount stores, because small costs add up fast over a year.
- Toys, games, puzzles, and books
- Craft and art supplies: paper, paint, glue, crayons
- Curriculum and activity materials
- Cribs, mats, high chairs, and child-size tables and chairs
- Diapers, wipes, tissues, and paper towels you provide
- Cleaning products, trash bags, and laundry for daycare linens
- First aid supplies and safety gear like outlet covers and gates
- Outdoor play items: balls, trikes, sandbox toys
Home costs you share with your family
This group is where the time-space percentage does its work. You add up these home costs for the year, then deduct your time-space share of them. These costs often make up the biggest single deduction a home provider gets.
- Rent, or mortgage interest if you own your home
- Property taxes and homeowners or renters insurance
- Electricity, gas, water, sewer, and trash service
- Repairs and upkeep for the home, like fixing a leak
- Home cleaning services for areas used by the daycare
- Depreciation of your home, if you own it (your tax pro can help with this one)
Running-the-business costs
Beyond the children and the home, running a legal, safe business costs money too. Most of these are deducted in full.
- State license or registration fees, and inspection fees
- Background check and fingerprint fees
- CPR, first aid, and required training classes
- Daycare liability insurance
- Business phone line or the business share of your cell phone
- Internet service, using your time-space or business share
- Advertising: signs, flyers, and website costs
- Accounting, tax prep, and bookkeeping help
- Bank fees for a business account
- Postage, printer ink, and office supplies
- Car trips for the business (see our mileage guide)
- Professional group memberships for child care providers
What you cannot deduct
Some costs never count, no matter what. Food your own family eats is personal. Your own children's costs are personal, even if they play with the same toys during daycare hours. Fines and penalties, like a parking ticket, are not deductible.
Big home projects that add value, like adding a room, are usually not deducted all at once. They are handled through depreciation over many years. When you are not sure about a cost, save the receipt and ask a tax professional at filing time.
Try it free: use our Time-Space Percentage Calculator — it does this math for you in about a minute, right in your browser.
Common questions
Can I deduct food for my own children who are in my daycare?
No. Food and costs for your own children are personal, even if they eat and play with the daycare children. Only costs for the children you are paid to care for count.
Do I need a receipt for every small purchase?
Save receipts whenever you can, and keep bank or card statements as backup. For food, you may use the IRS standard meal rates with meal counts instead of saving every grocery receipt.
Are gifts for daycare families deductible?
Small gifts for children or parents, like a birthday book or a holiday card, are generally treated as a business cost within IRS gift limits. Keep the receipt and note who it was for.
Keep reading
What Counts as Business Hours for Home Daycare Taxes?
Which hours count as business hours for your home daycare taxes? Care hours, cleaning, cooking, paperwork and more, explained in simple words.
Read this guide9 Home Daycare Tax Mistakes That Cost Providers Real Money
Nine common home daycare tax mistakes that cost providers real money, from skipping the hours log to misusing the food deduction, plus the simple fix for each.
Read this guideDisclaimer: HomeDaycareTools.com provides free calculators and general information for planning purposes only. Nothing on this site is tax, legal or financial advice. Tax rules, CACFP rates and licensing rules change — confirm your figures with IRS Publication 587, your CACFP sponsoring organization, your state licensing agency, or a qualified tax professional before filing or signing anything.