If you use space in your home on a regular basis in the or business of providing daycare, you may be able to deduct the business expenses even though you use the same space for nonbusiness purposes. To qualify for this exception, you must have applied for (and not have been rejected), been granted (and still have in effect), or be exempt from having a license, certification, registration, or approval as a daycare center or as a family or group daycare home under state law.
Special Computation for Certain Daycare Facilities
If the part of your home used as a daycare facility includes areas used exclusively for business as well as other areas used only partly for business, you cannot figure your business percentage using Part I. Instead, follow these three steps:
Figure the business percentage of the part of your home used exclusively for business by dividing the area used exclusively for business by the total area of the home.
Figure the business percentage of the part of your home used only partly for business by following the same method used in Part I of the form, but enter on line 1 of your computation only the area of the home used partly for business.
Add the business percentages you figured in the first two steps and enter the result on line 7. Attach your computation and enter "See attached computation" directly above the percentage you entered on line 7.