The purpose of Form 8829 is to calculate the allowed expenses related to using your home space for business purposes.
You can deduct business expenses for your home if:
- The part of the home used exclusively for business is your primary place of business, or
- You meet with clients, patients, or customers there for business purposes. or
- You use the space regularly as a storage facility or a day care center.
Prior to tax year 2018, Form 8829 is accessed in one of two ways in TaxSlayer Pro depending on whether the taxpayer is claiming the expense on Schedule C or taking the expense as an itemized deduction on Schedule A. Beginning in tax year 2018, Form 8829 is only accessed via Schedule C. The Business Use of Home worksheets are still accessible in the Itemized Deductions menu, but only for the purpose of carrying the deduction to a state return that still allows it.
To claim the expense on a Schedule C, from the Main Menu of the Tax Return (Form 1040) select:
- Income Menu
- Business Income/Loss (Sch C, C-EZ, 1099MISC)
- Select New or double-click the entry you wish to Edit. Select Pull if you prepared the return using the software in the previous year and wish to pull the data forward.
- Select Schedule C (Form 8829 cannot be filed with Schedule C-EZ)
- Enter a Principal Business Activity Code. This is a code used by the IRS to classify the type of business being operated. If you do not know the code, you have two options:
- You can select the PDF Icon to view an entire list of activity codes, or
- You can select the Magnifying Icon to search by category. If you search by category, double-click on the business code that represents the type of business and the code will fill in automatically for you.
- Input the heading information in the Schedule C Data Entry Menu. This will include the name of the business, the business address, and the zip code. The city and state information will fill in automatically based on the zip code that is entered.
- The questions on the Schedule C Questions Menu are defaulted to the most common answers for most taxpayers. Review these answers to ensure they are correct for this taxpayer's situation. You may need to adjust one or two items to reflect the way the taxpayer's business is operated.
- If there was a prior year unallowed loss, enter the amount on the Questions menu. CAUTION: Only enter an amount here if the current year's activity is a net profit. If the current year's activity results in a net loss, an amount entered here will cause an incorrect calculation.
- Income generated by the business is entered on the Schedule C Income Menu. To enter the income obtained by the business, on the Schedule C - Edit Menu select Income. The Income Menu has several income items broken down by sections. Enter the income in the Gross Receipts or Sales menu. If inventory is kept throughout the year, enter the beginning and ending inventory amounts in the Cost of Goods Sold section. Also enter the cost of labor and the amount spent on materials and supplies for the business.
- To enter expenses, from the Schedule C - Edit Menu select Expenses. Expense items such as advertising, repairs, utilities, and meals & entertainment can be deducted. Depreciation and car & truck expense, such as standard mileage and actual expenses, can be entered in the expense menu.
- Select Exit Menu until you reach Schedule C - Edit Menu
- Select Form 8829 (Business Use of Home)
- A separate Form 8829 is needed for each home used for business purposes. Select New or double-click the entry you wish to Edit.
- Area of Home Used for Business - The easiest method for calculating this area is to use the square footage method; however the IRS does not require any specific method for calculating as long as the percentage of use is accurately reported. This number should only be the space that you use for business.
- Total Area of the Home - Again, the easiest method is using the square footage method. If you choose to calculate this number, it needs to accurately represent the total space of your home, including the area that is used for business.
- Number of Hours the Home is used for Day Care per Day - When the area of the home is used for day care, enter the number of hours during the day that the area is used for day care purposes. (Example: If the taxpayer operates from 8am-8pm daily, enter 12 on this line.)
- Number of Days per Year the Home is used for Day Care - When the home is used for day care, enter the number of days the home is actually open for day care. (Example: If the business is open Monday through Friday and is closed for two weeks for summer vacation, you would enter 250 on this line (50 weeks x 5 days per week.)
The following screen is where you enter the expenses related to your home. To enter expenses related to the business, it is important to understand the difference between direct and indirect expenses.
- Direct expenses benefit only the area exclusively used for business. These expenses are fully deductible. (Examples: Cost of painting the area used only for business; cost of repairs to the area only used for business purposes.)
- Indirect expenses are those you incur for the entire home. These expenses are deductible based on the percentage on line 1. (Example: Mortgage interest, home utilities, cost for replacing the roof on the house, etc.)
The program will automatically apply the business percentage to amounts entered in the "Indirect Expense" column and deduct the business portion of the expense on Form 8829.
Prior to tax year 2018, unused portions of certain expenses can be carried back to Schedule A as an itemized deduction. The program will prompt you to input amounts of mortgage interest or real estate taxes you would like to carry to Schedule A when you exit the Form 8829 menu. If this return will include itemized deductions, enter the amounts to carry to Schedule A here. If not, this screen can be left blank.
To claim the expense as an itemized deduction on Schedule A prior to 2018, from the Main Menu of the Tax Return (Form 1040) select:
- Itemized Deductions Menu
- 2% Deductions & Job Expenses (2106)
- Business Use of Home Worksheet
NOTE: This is a guide on entering Form 8829 into TaxSlayer Pro. This is not intended as tax advice.