Day-Care Facility If you use space in your home on a regular basis forproviding day care, you may be able to deduct the business expensesfor that part of your home even though you use the same space fornonbusiness purposes. To qualify for this exception to the exclusiveuse rule, you must meet the following requirements. Figure B--Part I of Form 8829 You must be in the trade or business of providing day carefor children, persons 65 or older, or persons who are physically ormentally unable to care for themselves. You must have applied for, been granted, or be exempt fromhaving a license, certification, registration, or approval as aday-care center or as a family or group day-care home under state law.You do not meet this requirement if your application was rejected oryour license or other authorization was revoked. Figuring the deduction.If you regularly use part of your home for day care, figure whatpart is used for day care, as explained earlier under BusinessPercentage. If you use that part exclusively for daycare, deduct all the allocable expenses, subject to the deductionlimit, as explained earlier. If the use of part of your home as a day-care facility is regular,but not exclusive, you must figure what part of availabletime you actually use it for business. A room that is availablefor use throughout each business day and that you regularly use inyour business is considered to be used for day care throughout eachbusiness day. You do not have to keep records to show the specifichours the area was used for business. You may use the areaoccasionally for personal reasons. However, a room you use onlyoccasionally for business does not qualify for the deduction. TaxTip: To find what part of the available time you actually use your homefor business, compare the total time used for business to the totaltime that part of your home can be used for all purposes. You cancompare the hours of business use in a week with the number of hoursin a week (168). Or you can compare the hours of business use for theyear with the number of hours in the year (8,760 in 1999). Example 1.Mary Lake uses her basement to operate a day-care business forchildren. She figures the business percentage of the basement asfollows. Square footage of the basementSquare footage of her home = 1,6003,200 = 50% She uses the basement for day care an average of 12 hours aday, 5 days a week, for 50 weeks a year. During the other 12 hours aday, the family can use the basement. She figures the percentage oftime the basement is available for use as follows. Number of hours available for use (12 x 5 x 50)Total number of hours in the year (24 x 365) = 3,0008,760 = 34.25% Mary can deduct 34.25% of any direct expenses forthe basement. However, because her indirect expenses arefor the entire house she can deduct only 17.13% of the indirectexpenses. She figures the percentage for her indirect expenses asfollows. Business percentage of the basement 50% Multiplied by: Percentage of time used    34.25% Percentage for indirect expenses 17.13% Mary completes Form 8829 as shown on page 11 (Figure B).In Part I she figures the percentage of her home used for business,including the percentage of time the basement is used. In Part II, Mary figures her deductible expenses. She uses thefollowing information to complete Part II. Gross income from her day-care business $50,000 Expenses not related to the business use of thehome    $25,000 Tentative profit    $25,000 Rent $8,400 Utilities $850 Painting the basement $500 Mary enters her tentative profit, $25,000, on line 8. (This figureis the same as the amount on line 29 of her Schedule C.) The expenses she paid for rent and utilities relate to her entirehome. Therefore, she enters them in column (b) on the appropriatelines. She adds these two expenses (line 21) and multiplies the totalby the percentage on line 7 and enters the result, $1,585, on line 22. Mary paid $500 to have the basement painted. The painting is adirect expense. However, because she does not use the basementexclusively for day care, she must multiply $500 by the percentage oftime the basement is used for day care (34.25% -- line 6). Sheenters $171 (34.25% $500) on line 18, column (a). She addslines 21 and 22 and enters $1,756 ($171 + $1,585) on line 24. Becausethis is less than her deduction limit (line 15), she can deduct theentire amount. She completes the rest of Part II by entering $1,756 onlines 32 and 34. She then carries the $1,756 to line 30 of herSchedule C (not shown). Example 2.Assume the same facts as in Example 1 except that Mary also hasanother room that is available each business day for children to takenaps in. Although she did not keep a record of the number of hours theroom was actually used for naps, it was used for part of each businessday. Since the room was available during regular operating hours eachbusiness day and was used regularly in the business, it is consideredto be used for day care throughout each business day. The basement androom are 60% of the total area of her home. In figuring her expenses,34.25% of any direct expenses for the basement and room aredeductible. In addition, 20.55% (34.25% 60%) of her indirectexpenses are deductible. Meals.If you provide food for your day-care recipients, do not includethe expense as a cost of using your home for business. Claim it as aseparate deduction on your Schedule C (Form 1040). You can neverdeduct the cost of food consumed by you or your family. You can deductas a business expense 100% of the cost of food consumed by yourday-care recipients and generally only 50% of the cost of foodconsumed by your employees. However, you can deduct 100% of the costof food consumed by your employees if its value can be excluded fromtheir wages as a de minimis fringe benefit. Generally, the value ofmeals you provide to employees on your business premises is de minimisif more than half of these employees are provided the meals for yourconvenience. For more information, see chapters 2, 3, and 4 inPublication 535, Business Expenses. If you deduct the cost of food for your day-care business, keep aseparate record (with receipts) of your family's food costs. Reimbursements you receive from a sponsor under the Child and AdultFood Care Program of the Department of Agriculture are taxable only tothe extent they exceed your expenses for food for eligible children.If your reimbursements are more than your expenses for food, show thedifference as income in Part I of Schedule C. If your food expensesare greater than the reimbursements, show the difference as an expensein Part V of Schedule C. Do not include payments or expenses for yourown children if they are eligible for the program. Follow thisprocedure even if you receive a Form 1099 reporting a payment from thesponsor.