Learn about IRS Form 8829, including who qualifies and how to fill out this form to claim a home office deduction.
Discover everything you need to know about IRS Form 8829, including eligibility requirements and step-by-step instructions on how to properly fill out this essential form to claim a deduction for your home office. Maximize your tax savings by following this comprehensive guide. Don’t miss out on the opportunity to claim the home office deduction you deserve!Primary
Table of Contents
IRS Form 8829 is one of two ways to claim a home office deduction on your business taxes. Only self-employed people are eligible to claim this deduction. If your business qualifies for the home office deduction, youll file Form 8829 with your Schedule C, profit or loss from business.
There are two ways to claim the deduction: using the simplified method and reporting it directly on your Schedule C, or by filing IRS Form 8829 to calculate your total deduction.
This guide will focus on the latter option to explain what Form 8829 is, and how to file to claim your home office deduction.
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If you run a business out of your home or have a home office, you might be able to take a home office deduction on your tax return. One way to do this is to keep careful records and file Form 8829 with your tax return, but by doing this you can calculate and claim your home office deduction and save money on your taxes.
If you qualify for a home office deduction, youll file Form 8829 along with your personal tax return. It gets filed with your Schedule C, profit or loss from business. Youll report your total home office deduction on line 30 of your Schedule C.
Only self-employed people are able to claim a home office deduction — work-from-home employees are no longer able to deduct home office expenses, as part of the changes implemented by the Tax Cuts and Jobs Act.
Just because you work from home doesnt mean you automatically get to claim a home office deduction. The IRS is very specific about who qualifies and who doesnt.
To qualify for the home office deduction, your home office needs to:
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Be exclusively and regularly used for business, and
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Be your principal place of business, a place where you meet clients or a place where you store inventory.
Exclusive use can be tough to meet. Having a portion of your home be exclusively used as a business means it cant be used for anything else. So if you set up shop at your kitchen table during the day, you cant write that space off as a home office.
There are two exceptions to the exclusivity rule: if you run a daycare out of your home or if you use part of your home for inventory storage.
Your home office will count as your principal place of business if you do your management and administrative work from there and you dont have another fixed location to do that work. For example, a plumber who works at various houses all day but comes home and does billing and other paperwork from a home office would have the home office count as his principal place of business.
Form 8829 can be tricky to fill out. When in doubt, consult with a tax professional. They can help you decide what is allowed and whats not based on your specific situation.
Part 1: Measure your home office
Before jumping into this form, youll need to measure your home office. The goal of this section is to get the percentage of your home thats used for business. Youll use this percentage throughout the rest of the form to divide your expenses between personal and business.
For example, if your home is 1,000 square feet and your home office is 100 square feet, you use 10% of your home as part of your business. Youll use this percentage when it comes time to calculate how much of an indirect expense, like your rent, should be able to be taken as a deduction.
If you dont run a daycare, lines one, two, three and seven are going to be the only lines you use in this section. Youll take the square footage of your home office and divide that by the square footage of your whole house. That gets you the business percentage that youll use for the rest of the form.
Part 2: Figure your allowable deduction
This section is where you get into the expenses that you can add together to make up your deduction. This part of Form 8829 asks you to separate your direct and indirect expenses:
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Direct expenses are only related to the office portion of your home. If you need to repaint just your office, thats a direct expense.
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Indirect expenses are expenses related to your entire home, including your home office. If you repaint your entire home, including the office, thats an indirect expense.
To start this section, youll need to enter your profit from Schedule C, line 29. Thats straightforward, but it can get tricky if you have any gains or losses from the business use of your home or if you work from another location as well as your home. The IRS instructions have more details on what to include on line eight if either of those situations applies to you.
Once you have your profit entered on line eight, youll enter direct and indirect expenses on lines nine through 11 for:
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Casualty losses.
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Deductible mortgage interest.
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Real estate taxes.
If you take a standard deduction rather than itemizing deductions on your personal tax return (Schedule A), dont include anything for deductible mortgage interest or real estate taxes in this section. Youll include that below on lines 16 and 17.
Next on lines 16 through 31, youll be able to deduct other expenses, including:
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Excess mortgage interest paid.
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Excess real estate taxes.
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Insurance.
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Rent.
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Repairs and maintenance.
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Utilities.
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Any other operating expenses that you havent included.
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Depreciation (which youll calculate in part three).
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Excess casualty loss.
Part 3: Depreciation of your home
This part of Form 8829 can get really tricky — its now time to calculate the percentage of depreciation on your home you can include in your deduction calculation.
To do this, youll need to know the adjusted basis of your home or fair market value and enter whichever one is less on line 37. Then youll separate out the value of the land (line 38) and the value of the home (line 39). Thats because you only take depreciation on the building, not the land.
Youll then enter the depreciation percentage from the instructions on line 41. Multiply that percentage by the basis (value of your home) and youll get your allowable depreciation deduction. You can take that amount and enter it on line 30.
Part 4: Carryover of unallowed expenses
If you have more expenses than you can claim here, you can carry over the excess and claim it next year. This is where youll include the excess amount that youre carrying over.
The home office deduction calculation on Form 8829 is confusing. If youre stuck on something, its a good idea to get a tax professional involved to make sure you dont miss any valuable deductions you could claim.
Whether youre filling out Form 8829 yourself or getting professional help, there are a few things that will help make claiming your home office deduction easier:
Accurately measure your home office: As so much of this form depends on using the business percentage of your home, get accurate measurements of your space done early. Measure the part of your home that qualifies for the deduction and look up the total square footage of your home on your county records. This will make things speedier once it comes time to sit down and fill out the form.
Keep a list of direct and indirect expenses: Its easy to forget what direct and indirect expenses youll want to claim when taxes roll around. Home repairs that happened in January feel like a very distant memory over a year later. Keep a list and receipts of everything, both direct and indirect expenses, that you can use when filling out the form.
Consider the simplified approach: Beginning in 2013, the IRS introduced a new way of calculating the home office deduction called the simplified method. Under the simplified method, theres no extensive calculation to make or additional receipts to keep. You simply take a standard deduction of $5 for every square foot of office space, up to 300 square feet. So the maximum deduction you can take is $1,500.
However, you may get a larger deduction by using IRS Form 8829 — so before you make the switch, talk to your tax professional about which one is best for your situation.
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Form 8829 instructions
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IRS Form 8829 Instructions
