IRS Form 8829 Expenses for Business Use of Your Home

What Is IRS Form 8829 Used For?

Before you fill out the paperwork to deduct business expenses and replicate the details on your main tax return, you have to figure out whether you are eligible for this kind of deduction. You may complete IRS Form 8829 if your home residence is your principal place of business - you work from your home office, your trade or business cannot operate without you carrying out management and administrative operations from home, and there is no other location where you would conduct your business. Whether you are making appointments with your clients, meeting customers and patients, or retaining records, books, and archives in your house or apartment, you will be permitted to submit this form.

As for the expenses the home office deduction will apply to, they include but are not limited to real estate taxes, mortgage interest, rent, home insurance, maintenance of your residence, and utilities. However, remember the deduction will only work for the percentage of your residence you devoted to your business - for instance, you can claim the room you use as an office is your principal place of business but you cannot deduct a purchase of a new stove for your kitchen using this method even if you spend a few hours there with a client.

Form 8829 Instructions

The IRS Form 8829 Instructions are as follows:

1. Identify yourself by your name and social security number . Explain what part of your home is used for business on a regular basis - note that this must be an area you do not use for other activities. You should write down the square footage of the area as well as specify the total area of your residence to calculate the percentage required by the IRS. In case you run a daycare facility, state how many days and hours during the year your home was used for daycare.

2. Compute the allowable deduction . This section of the form lets you deduct expenses you have incurred during the calendar year - if these costs made an impact on your business directly or indirectly, you are free to list them in writing. Indicate the capital gains or losses of your business, deductible interest that applies to mortgage, and taxes you paid on real property you own or rent. Other types of expenses can also be deducted - use the formulas provided by the instrument to calculate the total amount of expenses and write the same number in Schedule C you attach to your tax return.

3. Take the depreciation of your residence into account. Record the value of your home, land, and the basis of the building . Refer to official instructions for Form 8829 to copy the depreciation percentage from the table they contain. It is advised to attach a separate sheet that elaborates on improvements and additions you have made to your apartment or house if they were used for business after you started providing services from your home.

4. In case your expenses exceed the limit established for the year described in the form, you can carry some of them over to the next year even if you end up living in a different place . Enter the operating expenses and specify excess depreciation and casualty losses.