Understanding Your Time/Space Formula

 
PART THREE- ARRIVING AT A FINAL PERCENT

Now that you have determined the portion of both time and space which can be allocated to your home daycare business, you are ready to compute your Time/Space formula. This will be accomplished by multiplying the decimal amount you arrived at in determining TIME by the percentage you arrived at by determining SPACE.

By applying the numbers that we have used in this three part tax series, you arrive at 41.67% as a business use deduction. Please refer to the example below:

SPACE .5150684 multiplied by TIME 80.90% equals 41.669033 percent which is rounded to 41.67%.

This 41.67% would be multiplied against applicable indirect expenses such as your home mortgage interest, property tax, and electric bill. These expenses will help to reduce your taxable income.

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