IRS Form 8829: Expenses for Business Use of Your Home
IRS Form 8829 is used by sole proprietors to calculate the home office deduction, which covers certain expenses related to the business use of your home. The form is not required if you’re using the “simplified method” to compute the deduction. The deductible amount from Form 8829 is then reported on Schedule C as a business expense.
Key Takeaways
- Form 8829 is used to calculate the home office deduction using your actual expenses for the business use of your home. Don’t use Form 8829 if you use the simplified method to calculate the deduction.
- Self-employed business owners can claim the home office deduction, but regular employees who receive a W-2 form from their employer can’t claim the deduction.
- Various expenses for the business use of your home can be claimed on Form 8829, including rent, mortgage interest, insurance, utilities, real estate taxes, home repairs, and more.
- Form 8829 has four parts that are used to calculate (1) the percentage of your home used for business, (2) your allowable home office deduction, (3) the depreciation of your home, and (4) any disallowed expenses that can be carried over to the next tax year.
What is Form 8829?
IRS Form 8829, Expenses for Business Use of Your Home, is a tax form used by certain self-employed people to calculate the home office deduction. It helps you determine the portion of your home expenses (such as mortgage interest, rent, utilities, insurance, repairs, and depreciation) that can be allocated to your home office and deducted from your business income. The form is filed along with Schedule C (Form 1040), which is used by sole proprietors to report business income and expenses.
What is the home office deduction?
To better understand how and when to use Form 8829, it helps to know a bit about the home office deduction. First, the deduction is available for certain people who work out of their home (more on this in a minute). If you qualify, you can deduct various home expenses that are related to the business use of your home.
In most cases, you can claim the home office deduction if you use part of your home exclusively and regularly as either:
- your principal place of business
- a place where you meet or deal with patients, clients, or customers in the normal course of your business
For example, you can’t claim the deduction if you use a single room in your home for both your “regular” job for your employer and a side gig you do as a self-employed person.
If all the requirements are met, you can use either your actual expenses or the “simplified method” to calculate the deduction. If you use the simplified method, you basically multiply the area of your home used for business – up to 300 square feet – by $5. For example, if your home office measures 10 feet by 10 feet, you can claim a $500 home office deduction (10’ x 10’ x $5 = $500).
The deduction can also be limited if your gross income from the business use of your home is less than your total business expenses. So, if you have a loss from your home-based business, your home office deduction might be reduced.
Who can deduct expenses for the business use of their home?
Just because you work from home doesn’t necessarily mean you can deduct expenses for the business use of your home using Form 8829 or some other tax form. You can only deduct these expenses if you’re a self-employed business owner. If you’re a regular employee – that is, someone who gets a W-2 form from your employer – you can’t claim the deduction even if you work full-time from your home (unless you’re also self-employed).
If you’re both an employee and running your own business on the side, you can’t claim the home office deduction for any part of your home used for both your regular job and your side gig. That would violate the deduction’s exclusive use rule.
All types of self-employed business owners can deduct expenses for the business use of their home if they satisfy all the requirements. For example, sole proprietors who work out of their home – either on a full-time basis or just for a side gig – can claim the deduction.
Partners in a partnership are considered to be self-employed – not employees of the partnership. As a result, they can also deduct expenses for the business use of their home if they’re required to pay those expenses under the partnership agreement.
Members of a limited liability company or other business treated as a partnership for federal income tax purposes can deduct home office expenses, too.
On the other hand, S corporation shareholders aren’t treated as self-employed people, so they can’t deduct the cost of maintaining an office or other workspace in their home.
Who should use Form 8829?
Form 8829 must be used by sole proprietors to calculate the home office deduction – unless they’re using the simplified method to compute the deduction. If the deduction is limited, the form is also used to figure the amount of nondeductible expenses that can be carried over to the next tax year.
You need to report the deductible amount from Form 8829 on Schedule C, where it’s combined with other expenses and used to calculate the profit or loss from your business. If you’re not a sole proprietor – that is, you don’t file Schedule C – then you shouldn’t use Form 8829.
If you’re a sole proprietor running multiple businesses out of your home, you need to file a separate Form 8829 to claim the home office deduction for each business (assuming you’re not using the simplified method). You can use any reasonable method to allocate the total allowable home office deduction to each business. For example, if you run two businesses out of your home and use your home office for an equal amount of time for each business, you can allocate 50% of the deduction to each business. Once the allocation is made, only report the amount allocated to each business on the Schedule C for that business.
If you use the simplified method to calculate the home office deduction, the deductible amount is reported directly on Schedule C without having to complete Form 8829. If you move or otherwise use more than one home for your business during the year – such as your primary residence and a vacation home – you can only use the simplified method to calculate the deduction for one home. You then have to complete a separate Form 8829 to figure the deduction for the other homes and their expenses.
Who should not use Form 8829?
There are a few instances where self-employed business owners shouldn’t use Form 8829 to calculate the home office deduction.
For instance, if you’re either a partner or farmer, you typically don’t need to file Form 8829 to claim the deduction. Instead, you can use the worksheets in IRS Publication 587 to calculate the deduction. Partners generally claim the deduction on Schedule E (Form 1040), while farmers claim it on Schedule F (Form 1040).
You also don’t need to file Form 8829 if all of the expenses for the business use of your home are allocable to inventory costs. In that case, report the expenses directly in Part III of Schedule C. This can happen if the expenses relate to the production, purchase, or sale of merchandise – for example, if your only home-related business costs are for the storage of merchandise and you can properly allocate these costs to the inventory items.
What’s included on Form 8829?
Form 8829 is divided into four parts. You need to complete each part to calculate your home office deduction for the year and any amount that can be carried over to the next tax year.
Let’s take a quick look at what’s included in each part.
Part I - Part of Your Home Used for Business
This part of Form 8829 is used to determine the percentage of your home used for business. In most cases, you simply divide the area of your home used for your business by the total area of your home. Square footage is typically used for these measurements, but you can use any other reasonable method if it accurately computes the necessary percentage. For example, you could divide the number of rooms in your house used for business by the total number of rooms in your house to come up with the percentage of your home used for business.
There are special rules for computing your business percentage if you run a daycare facility in a part of your home that's not exclusively used for the business.
Part II - Figure Your Allowable Deduction
This is where you report your expenses related to the business use of your home and calculate the amount of your home office deduction. The gross income limitation is also factored into the Part II calculations.
Only report expenses for the time you use your home for business purposes during the tax year. So, for example, if you start using part of your home for business on July 1, you can only deduct expenses for the last half of the year.
Part III - Deprecation of Your Home
Depreciation, which is an allowance for the wear and tear on business property, is considered a deductible expense related to the business use of your home. You calculate the depreciation of the part of your home used for business in Part III, then transfer the amount of allowable depreciation to Part II.
To determine your depreciation expense for the year, you’ll need to know the:
- date you started using your home for business
- adjusted basis and fair market value of your home at the time you began using it for business
- adjusted basis of the land on which your home sits and the fair market value of the land on the date you first used the home for business
- cost of any improvements before and after you began using your home for business
- percentage of your home used for business (from Part I)
Part IV - Carryover of Unallowed Expenses
You might not be able to deduct all of your expenses if your business expenses exceed your income from the business use of your home for the year. In this case, the nondeductible expenses can be carried over and applied in the following tax year. Part IV is where you calculate and report any carryover amount.
Note that any deduction for the carryover amount is subject to the gross income limit for the following year, whether or not you still live in the same home that year.
What expenses are deductible on Form 8829?
Various home-related expenses qualify for the home office deduction. Common deductible expenses you can include on Form 8829 include:
- mortgage interest
- rent
- homeowner’s insurance
- utilities
- repairs and maintenance to your home
- depreciation of your home
- real estate taxes
- security systems
- trash pickup
- casualty losses from a federally declared disaster
This is not an exhaustive list. Other expenses that are paid to own or maintain your home can be reported on Form 8829 if you otherwise satisfy the home office deduction requirements.
What are direct vs. indirect expenses on Form 8829?
When reporting your home-related business expenses in Part II, you’ll have to divide them into two categories – direct expenses and indirect expenses.
Direct expenses are those that are solely for a part of your home used for business. For example, the cost of painting a room that’s used exclusively for your business is a direct expense. So are home improvements that are only used for your business, such as adding an extension to your house that’s used exclusively for business purposes. These expenses are fully deducted.
On the other hand, indirect expenses are costs applicable to your entire home. This includes expenses like utilities, homeowners insurance, or a new roof. To determine the deductible amount of these expenses, multiply them by the percentage of your home used for business that’s calculated in Part I. For example, if your home office makes up 10% of your home's total square footage, you can deduct 10% of your indirect expenses.
TurboTax Tip:
Make sure you keep accurate records and receipts of both direct and indirect expenses related to the business use of your home. Having well-organized documents will make it easier to complete Form 8829 when it’s time to file your tax return.
Itemized deductions claimed on Form 8829
Mortgage interest, real estate taxes, and casualty losses can be claimed on Form 8829, but they can also be claimed as itemized deductions on Schedule A (Form 1040) if you don’t claim the Standard Deduction. As a result, there are some special rules and considerations for claiming these expenses on Form 8829 and Schedule A.
For example, you can’t claim both itemized deductions and the Standard Deduction on the same tax return. However, this rule doesn’t prevent you from reporting mortgage interest, real estate taxes, and casualty losses on Form 8829 and claiming the Standard Deduction.
If you do itemize, you have to divide these expenses into the “business portion” (the amount related to the business use of your home) and the “personal portion” (the remaining amount). The business portion is reported on Form 8829 (it will be captured in Part II of the form), while the personal portion is claimed as an itemized deduction on Schedule A.
There are also various limitations on the itemized deductions for mortgage interest, real estate taxes, and casualty losses. For instance, the itemized deduction for real estate taxes is capped at $10,000 per year. However, these restrictions don’t apply to the home office deduction. So, you can deduct the business portion of these expenses on Form 8829 without having to worry about the limits that apply to the personal portion.
Deducting a portion of your mortgage interest, real estate taxes, and casualty losses on Form 8829 can also have a beneficial ripple effect in other parts of your tax return. That’s because the home office deduction reduces your business profits and adjusted gross income (AGI), while itemized deductions don’t. As a result, shifting some of those expenses from Schedule A to Form 8829 can lower your self-employment tax, help you qualify for or avoid the reduction of tax breaks that are based on your AGI (such as the Earned Income Tax Credit), reduce taxes on Social Security benefits, and more.
When to file Form 8829?
You need to file Form 8829 with Schedule C and the rest of your personal income tax return (Form 1040). These forms are typically due on April 15 following the end of the tax year – for instance, tax returns for the 2024 tax year are due on April 15, 2025 – but an automatic six-month filing extension is available.
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