Form 8829 is used to calculate the allowed expenses related to a self-employed taxpayer using their home space for business purposes. Business expenses incurred in the home can be deducted if:
- The part of the home used exclusively for business is the primary place of business, or
- The taxpayer meets with clients, patients, or customers there for business purposes. or
- The space is regularly used as a storage facility or a day care center.
If the taxpayer's business was carried on in more than one home during the year, create two Forms 8829. If the home was used for a business for only part of the year, only enter the expenses paid or incurred during the part of the year it was used for a business.
Note: TaxSlayer Pro does not support use of Form 8829 for a Qualified Joint Venture. The Simplified Method Worksheet may be used as an alternative.
Taxpayers filing Schedule C
To claim the expense on a Schedule C, first create the Schedule C that relates to the business. Click here for more information about creating a Schedule C in TaxSlayer Pro.
Within the Schedule C, from the Schedule C Edit Menu select Form 8829 (Business Use of Home), then Form 8829 - Business Use of Home. Select New, then enter up to four amounts as needed:
- 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 used 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 the home, including the area that is used for business.
- Number of Hours the Home is used for Day Care per Day - If the home is used for day care, enter the number of hours during the day that the business area is used for day care purposes. (Example: If the taxpayer operates from 8 AM to 8 PM daily, enter 12 on this line.)
- Number of Days per Year the Home is used for Day Care - If 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, enter 250 on this line, i.e., 50 weeks x 5 days per week.)
The next window is where you enter the expenses related to the home. 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 incurred for the entire home. The deductible portion is calculated by multiplying the amount of the expense by the business use percentage. (Examples: mortgage interest, home utilities, cost for replacing the roof on the house.)
When completing Form 8829, the program will deduct the direct expenses in full and automatically apply the business percentage to the indirect expenses.
- Amount to (+/-) from Schedule C Amount - The program will pull the tentative profit or loss from Schedule C here. To this amount add any gain derived from the business use of the home and shown on Form 8949 (and included on Schedule D (Form 1040)) or Form 4797, and subtract any loss shown on Form 8949 (and included in Schedule D) or Form 4797 that is allocable to the trade or business in the home but not allocable to the use of the home. See Publication 587 if any questions.
- Casualty Losses - If the taxpayer is increasing their standard deduction by a net qualified disaster loss, don't make an entry here but instead claim the entire business use of the home portion of the casualty losses as Excess Casualty Losses. Otherwise, see the form instructions for the steps to follow to determine the amount to enter on this line.
- Deductible Mortgage Interest - If the taxpayer is claiming the standard deduction, don't make an entry here but instead claim the business use of the home portion of mortgage interest as Excess Mortgage Interest. Otherwise, if the taxpayer is itemizing deductions, see the form instructions for the steps to follow to determine the amount to enter on this line in the Indirect column. (Mortgage interest isn't entered in the Direct column, even if the taxpayer has a separate structure for their business.)
- Real Estate Taxes - If the taxpayer is claiming the standard deduction, don't make an entry here but instead claim the business use of the home portion of real estate taxes as Excess Real Estate Taxes. Otherwise, if the taxpayer is itemizing deductions, see the form instructions for the steps to follow to determine the amount to enter on this line and in which column.
- Excess Mortgage Interest - Only make an entry in the Indirect column. If the taxpayer is claiming the standard deduction, enter the entire home mortgage interest related to the home. (Don't include interest related to a home equity loan not used to improve the home.) If the taxpayer is itemizing deductions, see the form instructions to determine the amount to enter.
- Excess Real Estate Taxes - If the taxpayer is claiming the standard deduction, enter all the real estate taxes paid on the home in which business was conducted in the Indirect column. If the taxpayer is itemizing deductions and you calculated excess real estate taxes using the Worksheet for Line 11 in the instructions, enter the amount from that worksheet in the Direct column. Otherwise, don't make an entry here.
- Insurance - Enter the cost of insurance that covers the business part of the home.
- Rent - If the taxpayer is renting the home, enter the amount of the rent in the Indirect column.
- Repairs and Maintenance - Enter repair and maintenance costs in the appropriate column, depending on whether the repair benefits only the business portion of the home or the entire home. Take care to distinguish between repairs and improvements, that latter of which are capitalized rather than deducted. If in doubt, refer to Publication 587 for assistance.
- Utilities - Enter the utilities costs in the appropriate column. Utilities includes electricity, gas, trash removal, and cleaning services. It does not include telephone, as business-related telephone costs are deducted directly on Schedule C.
- Other Expenses - Enter any other expense related to the home not already included. For audit and tracking, use the F10 key to create an itemized list.
- Operating Expense Carryover - Enter the amount on last year's Form 8829 line 43, or if Form 8829 wasn't used last year the last amount of any carryover prior to last year.
- Excess Casualty Losses - Enter the result the business percentage multiplied by the amount of casualty losses attributable to the home that are in excess of the amount reported above.
- Depreciation of your Home - The business portion of the home is depreciated as MACRS 39-year property, and you can either calculate this year's depreciation in this menu, or you can select to use the depreciation module to set up the home and depreciate it there. If using the module, be sure to enter the business use percentage.
- Carryover of Excess Casualty Loss & Depreciation - Enter the amount on last year's Form 8829 line 44, or if Form 8829 wasn't used last year the last amount of any carryover prior to last year.
- Casualty Loss portion from Form 8829 lines 14 & 31 - If there is any casualty loss included on form lines 14 and 31, enter that amount here.
What about partners in a partnership or farm owners?
A partner with self-employment income from a partnership, and a farm being reported on Schedule F, use the "Worksheet To Figure the Deduction for Business Use of Your Home " found in IRS Publication 587 rather than Form 8829. This worksheet is included in the Schedule K-1 (Form 1065) entry window under Line 14A Net Earnings (Loss) from Self-Employment, and in Schedule F in the Expenses menu.
Note: This is a guide on entering Form 8829 into the TaxSlayer Pro program. This is not intended as tax advice.
Additional Information
IRS: Instructions for Form 8829 - Expenses for Business Use of Your Home