How To Complete Form 8829

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Working from a home office is a great option for many small business owners. One benefit is that you can deduct your expenses for your home business space to reduce your business taxes. Internal Revenue Service (IRS) Form 8829  is the form used to calculate these deductions.

Find out more about the process of using Form 8829 to set the amount of home space dedicated to your business and figure out what tax deductions are allowed.

What Is Form 8829?

IRS Form 8829 is used by small business owners to calculate the allowable expenses for business use of their home or apartment and total the amount of allowable deductions for operating expenses and losses. The form then is added to the business owner’s Schedule C form as part of their personal tax return on Form 1040 or Form 1040-SR (for seniors).

Who Should Fill Out Form 8829?

Before you begin to fill out this form, make sure your business space qualifies for this deduction. 

The IRS has two basic requirements.

The space must be used both regularly and exclusively for business purposes. “Regular” means that you use the space for business purposes on a continuing basis (daily, weekly, monthly). “Exclusive” means that the specific area is used only for business purposes, with no personal use allowed.

You don’t have to meet the exclusive-use test if you use part of your home for storage of inventory or product samples or as a day-care facility.

The space must also be your principal place of business, either your only place of business, or the place where you regularly and exclusively use the space for administrative or management activities.

Simplified Option 

You may not need to complete Form 8829 if you have a small home business space. A simplified option is available that allows you to calculate the square footage of your business space, up to 300 square feet, and multiply it by $5 a square foot to get the deduction amount, up to $1,500. This calculation goes directly onto your Schedule C. The same eligibility requirements apply.

What You Need To Fill Out Form 8829

Before you fill out this form, you’ll need to do some preliminary work and gather some information.

Business-Space Calculation

Your first task is to calculate the allowable business space compared with the total space of your home. You’ll need to know the total square footage of your home and the total square footage of the business space. Divide the home business space by the total area of your home to get a percentage of business use. For example, if your home is 2,000 square feet and your home business space is 200 square feet, that’s 10%.

Direct and Indirect Expenses

You will need to look at all of your home business-space deductions and separate them into direct expenses and indirect expenses. Use the details on expenses from your Schedule C for this purpose.

Some direct expenses (called “other expenses” on Form 8829) are those only for the business. These expenses include regular business expenses such as advertising, legal fees, and payments to employees or independent contractors that any business would have. These expenses aren’t entered on Form 8829; they are included elsewhere in your Schedule C.

Other direct expenses are home expenses that benefit only the business part of your home. Some examples might be painting the specific area, upgrading the lighting in the room, or installing a separate internet service or an entryway for customers.

Indirect expenses are those shared by the business space and the rest of the home. This is where the percentage comes in. Some shared expenses are utilities, mortgage interest, and general home repairs.

Depreciation and Casualty Losses

You’ll need to gather information on depreciation for your home, specifically the value of the land and the basis (cost) of the building. If you had a casualty loss to your home from a federally declared disaster during the year, you may be able to deduct a part of that loss as part of your home business costs. You will need the amount of that loss for the calculation.

If the deduction for a casualty loss is more than your income, your loss may be limited.  You may be able to carry over the excess loss (the amount over the limit for the year) into the next tax year.

How To Fill Out Form 8829

Here are the steps in filling out Form 8829. The form is complicated, with many exceptions and qualifications. Get help from a licensed tax professional to make sure everything is done correctly.

Part I - Part of Your Home Used for Business

Part I is the calculation of the home office space. This section is where you enter the information on your home business space and your total home space, and calculate the home business percentage. Enter the percentage of business space to home space on Line 7; it will be used in several other places in the form.

Part II – Figure Your Allowable Deduction

Part II is the main part of Form 8829, where you calculate the total home business expense deduction.

First, enter operating expenses as either direct expenses in Column (a) or indirect expenses in Column (b).

Enter both types of expenses at 100%, then apply the percentage to the total of all indirect expenses on Line 24.

Enter direct expenses (“other expenses”) on Line 22.

Part II also includes some other calculations, including a total allowable amount for depreciation from Part II and several calculations for casualty losses.

Part III – Depreciation of Your Home

This section calculates the business deduction for depreciation on your home based on the information you gathered about the cost. In the same way as other expenses, the amount of depreciation is calculated for the home, then the home business percentage is applied.

You can’t take a depreciation deduction if you use the simplified deduction option for the year.

Part IV – Carryover of Unallowed Expenses

If your business expenses are greater than your gross income from the business, your deduction for business use of your home is limited. You may be able to carry over some of the excess expenses into the next year.

Frequently Asked Questions (FAQs)

How do you figure out depreciation on Form 8829 if you only used the home for business for part of the year?

Part of the calculation for depreciation is a table for entering the percentage of use for individual months, depending on which month you first used your home for business during the year. For example, if you first used your home in January, enter 2.461% (the maximum), but if you only started using your home for business in December, enter 0.107% (the minimum). You can find the table on page 5 of the Instructions for Form 8829.

How does moving during the year affect Form 8829?

You can only deduct moving expenses for a home or business if you are a member of the armed forces on active duty under military order. Otherwise, gather all evidence of your expenses for the year for both locations and take them to a licensed tax professional to see what might be deductible as direct business expenses or shared home and business expenses. Calculating taxes on Form 8829 is complex, and figuring operating expenses and depreciation can be even more complicated with two different locations.

What are "other expenses" on Form 8829?

“Other expenses” are the regular expenses any business would have; they don’t have anything to do with your home business tax deduction. Examples are supplies, advertising, paying employees, and making payments on a business vehicle. You’ll need to total these other expenses from your Schedule C and include them on Line 22 of Form 8829. They are used to calculate total expenses for operations for purposes of determining limits on home business deductions.

How do you fill out Form 8829 when you have roommates?

The tax code doesn’t address the question of who lives in the home or apartment. There are only two requirements for being able to deduct your home office space to run your small business.

  • It must be used both regularly and exclusively for business purposes. Exclusively means that it can’t be used for any other purpose during the year.
  • It must be your principal place of business if you have more than one location for this business.

If you and your roommates can agree on a space to reserve for your business use only, measure the space and determine what percentage of your home or apartment it is. If the space is less than 300 square feet, you may be able to use the simplified method instead of using the more complicated Form 8829. Just multiply the square footage by $5 and include it on your Schedule C.

What does “recovery period” mean on Form 8829?

The recovery period for an asset (a home used for business purposes, for example) is the number of years over which that asset can be depreciated. This time period is different for different types of assets. If you use your home for business purposes, the recovery period for depreciation on your home business space (considered nonresidential real property) is 39 years.