Form 8829 Expenses for Business Use of Your Home (2023)

What Is a Form 8829

Form 8829, Expenses for Business Use of Your Home, is an IRS document used by individuals who operate a business from home. This form allows taxpayers to calculate and claim deductions for expenses related to the business use of their home. Deductions may include a portion of rent or mortgage interest, utilities, insurance, repairs, and depreciation. Filling out Form 8829 is essential for entrepreneurs and freelancers looking to reduce their taxable income by leveraging the costs of maintaining a home office.

When to Use IRS Form 8829

IRS Form 8829 is intended for use under specific situations:

• Sole proprietors and single-member LLCs that have not elected to be taxed as S-corporations or C-corporations.
• Taxpayers who use a portion of their home exclusively and regularly for administrative or management activities of their business.
• Daycare providers use part of their homes for business purposes.
• Individuals storing inventory or product samples for their business at home.

How To Fill Out 8829 form instructions

Step 1: Gather Documentation

Before beginning, gather all necessary documentation, including:

• Total square footage of your home.
• Square footage of the area used exclusively for business.
• Total home expenses (utilities, mortgage interest, insurance, etc.).
• Any direct expenses exclusively for the business area of your home.

Step 2: Provide Basic Information

At the top of the form, fill in your name and, if applicable, your social security number as it appears on your tax return.

Step 3: Calculate the Percentage of Your Home Used for Business

Part I of Form 8829: Calculate the percentage of your home used for business by dividing the square footage of the area used for business by the total square footage of your home.

Step 4: Enter Your Expenses

Part II: Here, you will list your actual expenses. This includes direct and indirect expenses. Direct expenses are those exclusively for the business part of your home (e.g., painting your home office). Indirect expenses are for keeping up and running your entire home, which are allocated based on the business use percentage calculated earlier. Common expenses include mortgage interest, property taxes, utilities, repairs, and depreciation.

Step 5: Calculate the Deduction

Follow the instructions within Part II to total your direct, indirect, and carryover losses from previous years. Then, calculate the allowable deduction based on the business-use percentage of your home.

Step 6: Depreciation Calculation

For those claiming depreciation, refer to Form 4562 to calculate depreciation amounts, then enter these totals in Part III of Form 8829. This section calculates the depreciation of your home office space, considering its business use percentage.

Step 7: Carryover to Schedule C

Part IV: Any non-deductible expenses due to the business income limit can be carried over to the next year. This section helps you calculate and document that carryover.

When to File Tax Form 8829

Tax Form 8829 should be filed alongside your annual income tax return. For most taxpayers operating their businesses as sole proprietors, this means attaching Form 8829 to Schedule C (Form 1040 or Form 1040-SR) and submitting it by the due date of your income tax return. Generally, this deadline falls on April 15th of each year unless an extension has been granted.

Incorporating Form 8829 into your tax filing process can substantially impact your taxable income, provided you meet the IRS guidelines for business use of your home. By understanding when and how to use this form, you can take full advantage of the deductions available, thereby reducing your overall tax liability.