Form 8829: Claiming expenses for the business use of your home
4 min read
March 24, 2021 • Block Advisors
The home office deduction is a key tax deduction you want to be mindful of this tax season and beyond—and it’s claimed using Form 8829. With millions of small business owners working from home, it’s important to read up on the form details to see if you qualify to take a deduction for your home office.
Learn all about who can take it, what it’s used for, and why it’s beneficial in this article!
What is IRS Form 8829 and why should you file it?
As a small business owner, your operating expenses can add up. Luckily, you can deduct many of them—including home office-related expenses, helping you lower your overall taxable income. This is called the home office deduction, and it’s a popular self-employed tax deduction for small business owners.
You can’t just take the deduction on your individual or business return—there’s a special form—Form 8829, Expenses for Business Use of Home—that helps compute a portion of expenses related to your home.
Who uses home office form 8829?
If you’re a self-employed or a small business owner and use a portion of your home for work purposes, use IRS Form 8829. You can take this deduction if your home office is your principal place of business.
Your home office will qualify as your principal place of business if you meet the following requirements.
- You use it exclusively and regularly for administrative or management activities of your trade or business.
- You have no other fixed location where you conduct substantial administrative or management activities of your trade or business
You should consider using this form if you’re currently determining your home office usage using the “safe harbor” method, which is a simplified way of calculating your deduction. Why consider the other method? In some cases, deducting actual expenses could result in a higher deduction than the safe harbor.
If you end up choosing to use the simplified safe harbor method (where you take a standard deduction of $5 per square foot of your home office, up to 300 feet), you don’t need to fill out this form. The number you arrive at using the simplified method goes directly on your Schedule C.
To calculate your deduction using actual expenses, you’ll use Form 8829. The number you arrive at (deduction amount) using Form 8829 is then claimed on a Schedule C.
If you’re a partner and your partnership requires you to pay ordinary and necessary expenses and you did not get a reimbursement, you may be able to deduct home office expenses on Schedule E.
If you are a C corporation or S corporation shareholder who receives wages as an employee, you cannot deduct home office expenses as a personal tax deduction. In some cases, the S corporation may elect to pay the shareholder rent for the home office or may look at setting up an accountable plan to reimburse employees for qualifying expenses.
Who can’t claim a home office deduction?
Previously, W-2 employees were able to claim a deduction for home office usage, but this went away with tax reform a few years ago. So, if you don’t work for yourself, you won’t be able to use this form.
Form 8829 instructions
You’re probably wondering how to fill out the form, right? Below is a summary of Form 8829 instructions, but please know Block Advisors is here to help you with the details.
This is a one-page tax form. At the top of the form, you’ll list yourself and your Social Security number. Then, you’ll fill out applicable sections:
- Part 1, Part of Your Home Used for Business: This section has you divide the area used regularly and exclusively for business or storage of inventory by the total area of the home. There are further steps involved if you operate a daycare within your home.
- Part 2, Figure Your Allowable Deduction: Here, you’ll enter the amount from Schedule C, line 29, plus any gain or loss derived from the business use of your home, minus any loss from the trade or business not derived from the business use of your home.
- Part 3, Depreciation of Your Home: This section helps you calculate the depreciation of your home.
- Part 4, Carryover of Unallowed Expenses to 2021: This section covers operating expenses and excess casualty losses and depreciation you can carry over to the next year.
Again, the allowable expenses for business use of home that you arrive at will be the number that carries through on your Schedule C, which then carries to Form 1040. If your home was used for more than one business, additional calculations may be required.
Help with Form 8829 – and other small business tax forms
Do the instructions for filing Form 8829 seem a bit daunting? Leave the task of completing tax forms like Form 8829 to the pros. You can trust your taxes to Block Advisors’ certified small business tax pros.
As your small business tax partner, you can also lean on us for bookkeeping and payroll services year-round, letting you get back to what you love!
Make an appointment today!