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COPYRIGHTED MATERIAL Chapter 1 Calculating Your Time-Space Percentage Before you start filling out your tax forms, calculate your Time-Space percentage for this tax year. This percentage is one of the most important numbers that you will use for your taxes because it determines how much of your key expenses you will be able to deduct as business expenses. For example, the Time-Space percentage is used in calculating home expenses on Form 8829, personal property depreciation expenses on Form 4562, and shared household supplies and other expenses on Schedule C. The specific deductions that are based on the Time-Space percentage include these: • • • • • • casualty losses mortgage interest real estate taxes homeowners insurance home repairs and maintenance utilities • • • • • • rent of a house or apartment home depreciation personal property depreciation home improvements land improvements household supplies and toys Since the total of these costs is usually a significant amount, it’s important to calculate your Time-Space percentage correctly. The Tax Organizer includes worksheets that you can use to calculate your Time-Space percentage quickly; this chapter provides a more detailed description of that process. Computing your Time-Space percentage is a three-step process. First you calculate your Time percentage, then you calculate your Space percentage, and then you multiply the two together. The formula that you will use looks like this: # hours your home is used for business x Total # hours in a year # square feet of your home used regularly for business = Total # square feet in your home Time-Space percentage Step One: Calculate Your Time Percentage The Time percentage is how much time your home is used for your business. You calcu­ late it by using the following formula: # hours your home is used for business Total # hours in a year = Time percentage 51 COPYRIGHTED MATERIAL