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.
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) - Select New or double-click an existing entry you wish to edit. (Note that a separate Form 8829 is needed for each home used for business purposes.)
- 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 - When 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 - 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, 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.)
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.
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.
Business Use of Home Prior to 2018
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.
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 the TaxSlayer Pro program. This is not intended as tax advice.