Filing IRS Form 8829 allows some taxpayers to claim a tax break for their home-based business. A portion of many of the expenses associated with maintaining your home are deductible for businesses purposes if you work or run your business from there. Form 8829 is for "Expenses for Business Use of Your Home."
You don't necessarily have to complete Form 8829 to claim this deduction, however. The IRS introduced a simplified home office deduction method in 2013 for small home offices of up to 300 square feet. You can simply multiply the square footage of your work space and multiply it by $5.
The simplified method might work out to less of a deduction than you're otherwise entitled to. Consider calculating your deduction both ways or check with your tax professional to find out if it's right for you.
What Is IRS Form 8829?
IRS Form 8829 walks you through the calculations for determining which expenses you can claim for the business use of your home, and the percentage of those expenses you can claim.
You would then transfer the resulting number to Schedule C, "Profit or Loss From Business," and submit the schedule, along with Form 8829, with your Form 1040 tax return.
Who Uses IRS Form 8829?
Self-employed taxpayers and small business owners can use Form 8829 to claim the home office deduction if they meet two criteria.
Your workspace must be the "principal place of your business," according to the IRS. This doesn't mean that if your business is training horses, you must bring them into your home.
It means you run your operation from there, though you can leave to actually perform the work your business is associated with.
And your workspace cannot be used for anything other than that—running and managing your business. The space you claim for a deduction can't do double-duty as a bedroom or a family room. You can use a portion or corner of a room as a home office as long as you exclusively dedicate that area.
The rule about using your work area exclusively for business purposes doesn't apply to daycare businesses.
Where to Get Form 8829
IRS Form 8829 is available on the IRS website. You can complete it online and print it out, or you can download a copy. The self-employed versions of most reputable tax preparation software will also complete the form for you, as well as your Schedule C.
How to Fill Out Form 8829
Your first step is to calculate the portion of your home that you use for business purposes. Part I of Form 8829 calculates the percentage of your home that's dedicated to your work. It asks you to describe the part of your home that you use.
Determine the square footage of the area you use for business, then divide that by the total square footage of your home to arrive at a percentage.
For example, your home business would take up 10% of your total home area if your workspace is 200 square feet and the total area of your home is 2,000 square feet.
Part II of Form 8829 calculates the deduction of your home expenses. First, enter the tentative profit from Line 29 of Schedule C, then enter:
- Direct expenses, such as rent and utilities
- Indirect expenses for casualty losses, deductible mortgage interest, and real estate taxes if you own your home
Multiply the total by the percentage of your home devoted to your business on Line 7.
You can then deduct:
- Excess mortgage interest
- Insurance costs
- Repairs and maintenance
- Other expenses
Part III is complicated; you might need the help of a tax professional if it applies to you. It deals with deductions carried over from the previous year, excess casualty losses, and depreciation.
Part III is used to calculate depreciation on your home so it can be allocated to your home business according to the percentage on Line 7. The total amount of depreciation is entered on Line 30.
Part IV applies to the carryover of unallowed expenses. Some of these expenses might have to be carried over to the next tax year. Consult with a tax professional to determine if this applies to you and your business.
Most reputable tax software will walk you through these complex calculations by asking you a series of questions, then entering the data for you.
Can Form 8829 Be E-Filed?
Form 8829 accompanies Schedule C with your 1040 tax return, so it can be e-filed along with these documents. If you work with a professional tax preparer, many of them are also authorized e-file providers.
Tax software will e-file your return and attachments for you, or you can use IRS Free File to prepare your return and e-file it if your adjusted gross income (AGI) was $72,000 or less in the 2020 tax year.
Where to Mail Form 8829
You can mail your tax return and its accompanying schedules and forms if you prefer not to e-file. The address you'd use depends on your state of residence. The IRS provides a state-by-state list online.
Tips for Completing Form 8829
There are several steps you can take to support your home office deduction:
- Make sure there's nothing in your work area that's not related to your business when you measure the square footage of your business space.
- Take several photos of the area from different angles so it's clear that the area is used exclusively for business.
- Time and date the photo and keep a copy of it in a safe place.
- Don't include bathrooms, the garage, or the basement unless it's furnished when you're calculating the full square footage of your home.
- Keep the measurements in a safe place or your tax file.
A realtor's listing from when you purchased the home, or any legal document that includes its square footage, will help to verify the total square footage of your home. Your landlord will most likely have this information on hand if you rent your home. Otherwise, get a good measuring tape and walk around taking measurements of each room.
Collect information on home expenses for the year, including property tax payments, mortgage interest statements, utility bills, homeowner's insurance, rent payments, repairs, and maintenance expenses.
- IRS Form 8829 is used by self-employed taxpayers and small business owners who maintain a workspace in their homes to calculate their home office deduction.
- The form calculates the portion of expenses related to your home that you can claim as a tax deduction on Schedule C.
- Your work area must be dedicated entirely to doing business—it can’t do double-duty as personal living space.
- The IRS offers a simplified version of the home office deduction that doesn't require completing or filing Form 8829, but using it can work out to less than the actual deduction you're entitled to claim.
NOTE: This article is presented for general information purposes only. Your particular tax situation might be more complex or different. Be sure to consult a tax professional for assistance with completing this form and claiming this deduction if you're unsure about any aspect of it.