How to Use This Calculator
This tool is designed for licensed family child care home providers who want to understand their true net earnings — not just their gross tuition income. Fill in each section on the left and results update instantly on the right.
- Enrollment & Tuition: Enter how many children you care for, your average weekly rate, and how many weeks per year you operate. Add any CACFP reimbursements or other income.
- Direct Child-Care Costs: Enter your real spending on food, supplies, transport, insurance, and licensing. These are fully deductible business expenses.
- Home Expenses (IRS Time-Space): Enter your total annual household costs (rent/mortgage interest, utilities, internet, repairs, home insurance) and the floor areas and hours used for daycare. The calculator applies the IRS time-space percentage to find the deductible portion.
- Your Time: Enter total hours you work per week to see your effective hourly rate.
What the IRS Time-Space % Means
Under IRS Publication 587, home daycare providers can deduct a portion of household expenses — even for rooms the family also uses — by multiplying two fractions:
- Space % = daycare area ÷ total home area
- Time % = (hours/day × days/week × weeks/year) ÷ 8,760
- Time-Space % = Space % × Time %
Apply this percentage to indirect home expenses (utilities, rent, insurance, repairs) to find the deductible portion you can count as a business cost.
What Counts as a Direct Expense?
Expenses used exclusively for the daycare are 100% deductible without the time-space calculation:
- Food and beverages served to children
- Daycare-only toys, books, and curricula
- Daycare-specific liability insurance
- Licensing fees, CPR renewals, required training
- Daycare-only marketing costs
Shared items (a toy used by your kids too) should use the time-space %. This calculator lets you enter real costs rather than estimating the split.
When and Why to Run This Calculation
Before setting or raising tuition: Many providers set rates by looking at what competitors charge — without knowing if those rates actually cover their costs. Run this calculator first, then compare your minimum break-even rate to the local market.
Before accepting a new enrollment: Each additional child adds tuition revenue but also adds food, supply, and possibly insurance costs. The marginal net per additional child is often different from the average — especially once you're at maximum capacity.
At year-end for tax preparation: The time-space percentage calculation is exactly what you'll need for IRS Form 8829. Use this tool to organize your inputs before sitting down with your accountant.
Evaluating CACFP participation: If you're considering joining the Child and Adult Care Food Program, enter the expected monthly reimbursements as additional weekly income to see the impact on your net.
Frequently Asked Questions
What is the IRS time-space percentage and how is it calculated?
The time-space percentage is a special formula defined in IRS Publication 587 that determines what share of your household costs you can claim as a home daycare business deduction. It multiplies two fractions: Space % (your daycare floor area ÷ total home floor area) and Time % (your annual daycare operating hours ÷ 8,760 hours in the year). Unlike most home-based businesses, daycare providers can include rooms used by the family in the evenings and weekends — the time factor accounts for this shared use. For example, if 50% of your home is used for daycare and you operate 33% of annual hours, your time-space % is 50% × 33% = 16.5%.
What is a realistic net profit per child per week for a home daycare?
Net profit per child per week varies enormously based on your state, tuition rates, enrollment size, and home costs. Generally, food costs alone run $15–$30 per child per week. After supplies, insurance, and the home expense share, many providers net between $50 and $150 per child per week — though providers in high-cost markets charging $350+/week may net substantially more. Running at full licensed capacity distributes fixed costs (home expenses, insurance, licensing) across more children, improving the per-child margin. Use this calculator with your real numbers rather than relying on averages.
Can I deduct mortgage principal payments for my home daycare?
No. Mortgage principal repayments are not deductible. However, mortgage interest and property taxes are indirect expenses that you can partially deduct using the time-space percentage via IRS Form 8829. Additionally, home depreciation (a non-cash expense) can be deducted using the time-space %, which can meaningfully reduce your taxable income. Enter mortgage interest (not principal) in the "Total annual household indirect expenses" field for this calculator.
Should I include CACFP reimbursements in my income?
Yes — CACFP reimbursements are taxable income and must be reported. However, they also significantly offset your food costs. The cleanest approach for this calculator is to enter your net food cost after CACFP reimbursement in the food field, or alternatively enter your gross food spend and add the weekly CACFP reimbursement amount in the "Additional weekly income" field. Both approaches correctly capture the net economic impact. For 2025 rates, Tier I providers receive approximately $1.40 per breakfast, $2.63 per lunch, and $0.78 per snack per child (see USDA CACFP for current reimbursement rates).
How is my effective hourly rate calculated?
Your effective hourly rate is Annual Net Earnings ÷ Total Annual Hours Worked, where total annual hours = (hours per week × weeks open per year). This gives you a true "wage equivalent" — which is often lower than providers expect, because unpaid hours for planning, cleaning, record-keeping, and communication are included. Many providers undercount their hours by only counting the hours children are present. Including all business-related tasks gives you the most accurate picture of whether your rates are sustainable.
What floor area should I include in the daycare space calculation?
Include every room or area regularly used for daycare — this can include your living room, kitchen, bathroom used by children, nap rooms, hallways, and storage for daycare supplies. Per IRS guidance and Tax Court precedent, a garage or outdoor deck attached to the home that is regularly used for children's activities can also count. Do not include areas never used for daycare (a master bedroom, home office used solely for personal purposes). Outdoor areas that are not physically attached to the home cannot be included in the space calculation.
Does hiring an assistant change my net earnings calculation?
Yes — employee wages and payroll taxes for an assistant are 100% deductible business expenses. If you hire an assistant, add their weekly cost to the "Other direct costs" field. Many states require an assistant if you care for more than a certain number of children, so this cost should be reflected in your rates. Note that if you pay an assistant, you have employer payroll tax obligations (Social Security, Medicare, unemployment) in addition to their wages — typically 10–15% on top of wages.