COPYRIGHTED MATERIAL 54 Family Child Care Tax Workbook and Organizer In the total square footage of your home, include every area of your home, including your basement, porch, deck, carport, detached garage, basement, and other structures on your land, such as a barn. Do not include the following spaces: lawn, garden area, drive­ way, sidewalk, sandbox, or outdoor play space. IRS Child Care Provider Audit Technique Guide on the Space Percentage The guide explicitly states that providers should count both their basements and garages as part of the total square feet of their home. A Tax Court case (see the Uphus and Walker v. Commissioner case in appendix B) has also ruled that providers can claim their laundry room, storage room, and garage as regularly used in the business, even if the children in care never use the rooms. This means that when you count your basement in the total square footage of your home, you may be able to count areas such as the following as regularly used by your business: the furnace and water heater area (if used regularly to heat the home and water used by the business), the laundry room (if used regularly to wash children’s clothes, bedding, and blankets), and the storage areas (if used regularly to store toys, holiday decorations, or home maintenance equipment used in the business). The inclusion of basements and garages into the Space percentage calculation can have different consequences for providers. For providers who use these areas on a regu­ lar basis for their business and have other rooms that are not regularly used in their business this is good news because it will increase their Space percentage. For providers who have exclusive-use rooms and did not previously count these areas, this is bad news because it will decrease their Space percentage. For providers who use all of their rooms on a regular basis for their business as well as their basement and garage, this will not make any difference. In my experience working with thousands of child care providers, I have found that it is very common for providers to use all the rooms of their home on a regular basis for their business. If this applies to you, don’t hesitate to claim 100% Space percentage. Let’s look at an example of a Space percentage calculation: Used regularly for business? Living room Dining room Kitchen Entryway or stairs Second-floor hallway Master bedroom Child’s bedroom Child’s bedroom Bathroom Basement playroom Basement furnace/ laundry area Basement storage area Garage/carport Total Count as business space Yes Yes Yes Yes Yes Yes Yes No Yes Yes 300 sq ft 200 sq ft 150 sq ft 150 sq ft 75 sq ft 200 sq ft 150 sq ft 100 sq ft 275 sq ft Yes Yes/No Yes # square feet of your home used regularly for business = Total # square feet in your home 50 sq ft 150 sq ft 200 sq ft 2,000 sq ft 2,000 2,500 = COPYRIGHTED MATERIAL Don’t count as business space 250 sq ft 250 sq ft 500 sq ft 80% Space percentage