Tax Advice
U.S. Tax Form 8829—Expenses for Business Use of Your Home
Form 8829, Expenses for Business Use of Your Home, is an important tax form for many small business owners who use part of their home for business. It covers direct and indirect expenses, but can be a little daunting, especially since it references other tax forms too.
But don’t stress just yet. Below, you’ll find an easy-to-understand breakdown of each section of the form and explanations of the trickier lines. Along with the explanations, you can access Form 8829 below, along with information on each section.
This is intended as a guide on how to fill out this form to deduct expenses. Each business is unique, so if you have any questions about claiming home office expenses talk to an accountant about your total home office deduction and how to claim expenses.
What Is Tax Form 8829?
If you have a home office and want to take advantage of deducting home office expenses, you’ll want to take a look at Form 8829. This form is one way to deduct the allowable business percentage of expenses on your tax return, potentially saving you a lot of money on your tax bill. Form 8829 gets filed along with your 1040 personal tax return.
Who Can Use Tax Form 8829?
The IRS is very specific about what does and doesn’t qualify as a home office. If you want to claim a home office deduction, there must be a part of your home that is used exclusively and regularly as your principal place of business.
“To be used exclusively” means that you have to have a separate space that’s only used for business purposes. Working from your kitchen table doesn’t allow you to qualify for a home office deduction because it’s not exclusive use. After all, you use your kitchen for your personal life as well. But working from a separate bedroom that has been designated to be used only as a home office would qualify as exclusive use.
There is an exception for the exclusivity requirement if you run a daycare. The IRS understands that you may not have an area that’s used exclusively for the daycare, so the exclusive use requirement doesn’t apply. See these instructions for further explanation of the exception.
In addition to exclusive use, your home office must be your principal place of business. A principal place of business can include:
- The place where you meet clients or customers.
- Where you do substantial administrative or management activities, and you don’t have another fixed location where you also perform a substantial amount of these activities.
If you use your home office to do most of your management activities, but also do some occasionally from your hotel room while traveling, your home office could still qualify for the deduction. Or, if you meet clients outside of your home but still do most of your management activities in your home office, your home office may still qualify for the deduction.
If you use part of your home as storage space for inventory and samples, and have no other fixed location for your business, that space can also qualify for the home office deduction.
An Alternative to Tax Form 8829
While tax Form 8829 can save you money, it can also be cumbersome to fill out. That’s why the IRS introduced the simplified home office deduction method. If your home office is fewer than 300 square feet, you could qualify to use this method. Rather than itemizing all expenses and home office deductions, you claim a standard deduction of $5 per square foot.
For example, if your home office is 250 square feet, you’d claim a home office deduction of $1,250 for business expenses. The IRS has published a comparison of the two home office deduction methods.
Filling out Tax Form 8829
Some parts of the form can be complicated. We’ll walk through each section and help you decode what certain lines are asking for. To make things easier, before you start filling in Form 8829 gather the following information:
- the square footage of your home office
- the square footage of your entire home
- records of any expenses, including indirect expenses (e.g., property taxes and utility bills)
Form 8829 (Expenses for Business Use of Home) is an important form for many business owners who use part of their home for business.
Part 1: Calculate the Part of Your Home Used for Business
In Part 1 of Form 8829, you’re going to calculate the percentage of your home used in business. If your business is not a daycare, you can simply divide the area of your home used regularly and exclusively for business or inventory by the total area of your home.
For example, if your home office is 400 square feet and the total size of your home (including the home office) is 2,000 square feet, the percentage of your home used on a business basis is 20%.
This percentage will be used throughout the rest of the form to figure out your allowable deduction next tax year, so take the time to get it right.
If your business is a daycare, you’ll need to calculate the percentage of time your home is used as a daycare, rather than calculating the area. The form will walk you through how to do that calculation.
Part 2: Figure out Your Allowable Deduction
Now it’s time to calculate your allowable deduction. The section begins with the potentially tricky Line 8.
Line 8: Most people simply enter the value of Line 29 from their Schedule C onto Line 8 of Form 8829. But here’s where it can get tricky. If you had any capital gains or losses from the business use of your home, you have to account for them here.
If you work from home and another location, you have to enter the percentage of Line 7 from your Schedule C that represents the percentage of taxable income earned from home. Check out the IRS site for more information and to help clarify your specific situation.
When filling out the remainder of this section, you’ll see two columns: one for direct expenses and one for indirect expenses. You’ll generally want to enter 100% of indirect expenses in column B. In other words, enter the entire electricity bill delivered to your home. The IRS guide has more information on how to deduct expenses like this.
Before you begin filling it out, you’ll want to brush up on the definition of direct and indirect expenses.
- A direct expense is something that will only benefit the business section of your home. For example, installing a light fixture or painting that room only.
- An indirect expense benefits your entire home, not just your home office. An example of this is your electricity bill. Things like electricity are both business and personal expenses.
Now that you’ve brushed up on the difference, it’s time to fill out your direct and indirect expenses:
Line 9: If you have losses from casualty and are filling out Form 4684 then you’ll need to fill out this line. For more instructions, see the IRS website.
Line 10: This is where you would enter interest paid on your mortgage. It is considered an indirect expense unless you have mortgage interest specifically for a separate structure you use to run your business. Since you can also claim mortgage interest on your Schedule A, it is worth looking into the IRS rules about how to manage the two schedules.
Line 11: This is where you would enter any real estate tax you have paid. It is considered an indirect expense unless you have real estate taxes specifically for a separate structure you use to run your business. Since you can also claim real estate taxes on your Schedule A it is worth looking into the IRS rules about how to manage the two schedules.
Line 16: The amount you enter for the excess home mortgage interest deduction will depend on what deductible mortgage interest you’ve already claimed on Schedule A. If you claimed the standard deduction, you’ll enter all the home mortgage interest you paid in column B.
If you itemize deductions but didn’t claim the full amount of interest paid because of limits on how much you can claim as a personal expense, you’ll include the excess (the amount you weren’t able to claim) in column B.
Line 17: Just like with the home mortgage interest deduction, how you fill this out will depend on whether you take the standard deduction or itemize. If you use the standard deduction, enter the total amount you paid in property taxes in column B.
Line 18: Enter the amount paid for homeowners insurance. Generally this will go in column B.
Line 19: If you rent as opposed to own your home, enter the amount you pay in rent. Generally this will go in column B. For more info check out the IRS guide.
Line 20: Enter the amount you spent on repairs and maintenance for your home. These can fall into column A or B, depending on the nature of the work done—whether it was a direct or indirect expense for your home office. For example, if you repaired the furnace, it would be entered in the indirect column (B). But if you got your office repainted, that would be entered in the direct column (A).
Line 21: Enter the amount spent on utilities. These can fall into both the direct (A) and indirect (B) columns depending on the utility. For example, your electricity bill would fall into the indirect column (B) because it’s a bill for electricity for your entire home. But if the expense is for a “business use only” landline phone, that would land in column A, direct expenses.
Line 22: This is where you can include any other business use of home expenses that weren’t covered elsewhere. For example, you could include neighborhood association dues here. For more info check out the IRS guide for this section.
Line 28: If you have casualty losses beyond what you entered on Line 9, multiply them by the business percentage of those losses and enter the result on Line 28. The IRS’s guide has more information if you need it.
Line 30: You’ll need to jump down to section three to calculate the depreciation on your home before you can enter a number on this line.
Line 36: After a few more calculations, you’ll finally end this section with the total allowable expenses related to home office deductions. You’ll want to take this number and also enter it on Schedule C.
Part 3: Depreciation of Your Home
Remember Line 30 up in Part 2? This is where you calculate the home depreciation deduction that you take. You take a home depreciation deduction using the percentage of your home used in business and the smaller of your home’s adjusted basis or its fair market value. Depreciation is only taken on your home, not on the land. Don’t forget to recapture the depreciation when you sell the house.
The instructions walk you through how to do the depreciation deduction calculation. You may want to consult an accountant to help you get the numbers right.
Part 4: Carryover of Unallowed Expenses
Unallowed expenses are business expenses that you may not be able to claim as deductions for the year. If your allowable expenses exceed the limit that you can take as a deduction, the remaining amount cannot be deducted on this year’s taxes. However, any unallowed home office deductions can be carried over to next year.
Conclusion: Form 8829
Form 8829 captures valuable home office deductions for business owners who use their home as their principal place of business. It is important to keep accurate records in order to fill out Form 8829 correctly.
If you have any questions, it is advisable to talk to an accountant or tax professional to avoid audit risks or be prepared for an audit.
This post was updated in December 2024.