Time-correlated single photon counting allows luminescence lifetime information to be determined on a single molecule level. This paper develops a formalism to allow information theory analysis of the ability of luminescence lifetime measurements to resolve states in a single molecule. It analyzes the information content of the photon stream and the fraction of that information that is relevant to the state determination problem. Experimental losses of information due to instrument response, digitization, and different types of background are calculated and a procedure to determine the optimal value of experimental parameters is demonstrated. This paper shows how to use the information theoretical formalism to evaluate the number of photons required to distinguish dyes that differ only by lifetime. It extends this idea to include distinguishing molecular states that differ in the electron transfer quenching or resonant energy transfer and shows how the differences between the lifetime of signal and background can help distinguish the dye position in an excitation beam.