Using Form 8829 to Write-Off Business Use of Your Home

As a business owner, you can take advantage of deductions and write-offs to lower your tax liability when you file — but there are rules.

If you use your home for business, you may be eligible for a deduction for the percentage of your home that you use exclusively as a workspace.

Here’s what you need to know before you file Form 8829 if you use a part of your home exclusively for business use.

What is Form 8829?

Form 8829, Expenses for Business Use of Your Home, is the form you file to claim the home office deduction on your taxes. If you use a portion of your home exclusively for business, you might be eligible for a deduction when you file your tax return.

The deduction you can claim is based on the area of your home that you use exclusively for business. If you use your bedroom or another part of your home for both business and personal use, then you cannot use these costs as part of your  home office deduction because those areas were not used exclusively for business.

When you file your taxes, Form 8829 will be attached to Schedule C (Form 1040) to claim the home office deduction. If you’re claiming the home office deduction for multiple residences, you need to file Form 8829 for each home.

What does business use of home mean?

Business use of home means you use an area of your home exclusively for business purposes. That area would be a home office for most people, but it can be any part of your house you use for administrative or management purposes.

If you use a part of your house for both business and personal use, that space isn’t eligible for the home office deduction because the exclusive use requirement is not met. The good news is that you can still claim other tax write-offs if you have other business-related expenses.

Who should use Form 8829 on their taxes?

If you use any part of your home exclusively for business purposes and are planning on itemizing deductions, you should complete Form 8829 and attach it to your tax return. The home office deduction can really help reduce your business net income if you’re self-employed.

Unfortunately, not everyone qualifies. You have to use an area of your home exclusively for business to qualify, and that has to be your primary place of business. You can still qualify if you have another (secondary) place of business.

Let’s look at a few examples to clarify who qualifies and who doesn’t.

If your home office is also a bedroom or family room, that’s not considered business use of your home. You can qualify for other tax write-offs to save on taxes, but you can’t claim the home office deduction.

Maybe you recently moved into a new home and decided to section off one room as your home office. If this room is used exclusively for business purposes and not as a living space or playroom, you can qualify for the home office deduction.

You can even qualify for the home office deduction if you rent. You will still use the area of your home that is used exclusively for business for allocable expenses, but you can then also claim a portion of the rent you pay each month as a deduction if you qualify.

Do remote employees use Form 8829?

Remote employees cannot use Form 8829 as employees are currently not eligible for a deduction for unreimbursed employee expenses under the tax reform. Even though you’re working remotely in your house, it’s as an employee, and the primary place of business is the office where the company is located.

Keep in mind that this only applies if you’re a remote employee, not a remote worker in general. If you work as an independent contractor or you work remotely as an owner/employee of your self-employed business, you can still qualify for the deduction if your space meets the criteria.

Claiming a deduction you’re not eligible for could potentially lead to an IRS audit, so you don’t want to claim the home office deduction if you don’t qualify. If you’re not sure, talk to a tax expert when you file.

What expenses are eligible?

When you take advantage of the home office deduction, there are a few types of expenses that are deductible:

• Rent
• Mortgage payments
• Property taxes
• Utilities
• Insurance
• Depreciation
• Maintenance
• Repairs

The expenses you can claim will depend on which method you use to calculate your deduction. With the simplified method, you can claim $5 per square foot for a maximum deduction of $1,500. Note that the simplified method can only be applied to spaces of 300 square feet or less.

On top of that $1,500 deduction, you can claim home-related itemized deductions in full, as allowed, on Schedule A.

On the other hand, there’s the regular method, which is based on a percentage of the home dedicated exclusively, to business use. If you use the regular method, you have to figure out the actual expenses you can deduct and maintain records of everything. You may want to hire a tax expert if you plan on using the regular method to figure out your home office deduction.

The regular method also allows you to claim home-related itemized deductions, but these deductions are divided between Schedule A and business schedule (Schedule C or F).

How to use Form 8829

At a glance, Form 8829 might look more complicated than it actually is, but it’s fairly easy to use. We’ll break down the Form 8829 instructions into individual parts and walk you through each step. If you still need help, you can have a tax expert assist you when filing.

Part I

The first part of Form 8829 is where you figure out how much of your home is used for business purposes. On line 1, enter the area of your home — in square feet — that you regularly use for business purposes.

On line 2, enter the total area of your home in square feet. For line 3, divide line 1 by line 2 to figure out what percentage of your home you use for business.

If you operate a daycare facility that isn’t used exclusively for business, you can multiply the number of days your home was used for daycare and the number of hours it was used each day. Enter this number on line 4. 

If line 4 doesn’t apply to you, go to line 7.

For line 5, note the hours if you started or stopped daycare use of your home. For line 6, divide line 4 by line 5. 

If you operate a daycare, you’ll multiply line 6 by line 3 for line 7; otherwise, carry down the amount from line 3.

Part II

Part II is the bulk of Form 8829. For line 8, start by entering the amount from Schedule C, line 29 — plus any gains resulting from business use of your home minus any losses not resulting from business use of your home.

For lines 9–22, you can enter your direct and indirect expenses. This includes:

• Casualty losses
• Deductible mortgage interest
• Real estate taxes
• Excess mortgage interest
• Excess real estate taxes
• Insurance
• Rent
• Repairs
• Maintenance
• Utilities
• Other expenses

After you enter your expenses and add lines 16–22 on line 23. On line 24, you’ll multiply column b of line 23 by line 7. Line 25 allows you to carry over the prior year’s operating expenses if you’re eligible.

On line 26, add column a of line 23 to lines 24 and 25. Next, enter the smaller of lines 15 and 26 on line 27. For line 28, subtract line 27 from line 15.

For line 29, you’ll multiply the casualty losses attributable to the home in which you conducted business that are in excess of the amount reported on line 9 (if any) by the business percentage of those losses.

For line 30, come back and enter the info from line 42. For line 31, find your previous year’s Form 8829 (if you have one) and enter the info from line 44. Then, for line 32, add lines 29 through 31.

On line 33, enter the smaller of line 28 or line 32. Next, add lines 14, 27, and 33. If there was a casualty loss portion on line 14 or 33, enter that on line 35.

Finally, for line 36, subtract line 35 from line 34 to figure out your allowable expenses for business use of your home. Enter this amount of line 30 of Schedule C as well.

Part III

Part III is used for calculating the depreciation of your home. Look at your home’s adjusted basis and fair market value — enter the smaller of the two numbers on line 37.

On line 38, include the value of the land. On line 39, figure the basis of the building by subtracting line 38 from line 37.

On line 40, multiply line 39 by line 7 to figure out the business basis of the building.

For line 41, refer to the instructions to find your depreciation percentage based on when you first used your home for business.

Multiply line 40 by line 41 and enter that number on line 42.

Part IV

Part IV is for the carryover of unallowed expenses to the next tax year. On line 43, subtract line 27 from line 26. If the number is less than 0, enter -0-.

For line 44, subtract line 33 from line 22 and enter -0- if the number is less than 0.

Do you have to use Form 8829?

If you’re not interested in filling out Form 8829, you can still claim the home office deduction using the simplified method.

The simplified method is quick and easy. Figure out how many square feet of your home you use for business purposes, then multiply that number by $5 for a maximum deduction of $1,500. No matter what moves you made last year, TurboTax will make them count on your taxes. Whether you want to do your taxes yourself or have a TurboTax expert file for you, we’ll make sure you get every dollar you deserve and your biggest possible refund – guaranteed.