Deduct expenses for the business use of your home on Form 1040.
Where you deduct these expenses on the form depends on whether you
are:
- A self-employed person, or
- An employee.
Self-Employed Persons
If you are self-employed and file Schedule C (Form 1040), complete
and attach Form 8829 to your return. If you file Schedule F (Form
1040), report your entire deduction for business use of the home, up
to the limit discussed earlier (line 32 if you used the worksheet), on
line 34 of Schedule F. Write "Business Use of Home" on the dotted
line beside the entry.
Deductible mortgage interest.
If you file Schedule C (Form 1040), enter all your deductible
mortgage interest on line 10 of Form 8829. After you have figured the
business part of the mortgage interest on lines 12 and 13, subtract
that amount from the total mortgage interest on line 10. The remainder
is deductible on Schedule A (Form 1040), lines 10 and 11. If the
interest you deduct on Schedule A for your home mortgage is limited,
enter the excess on line 16 of Form 8829.
If you file Schedule F (Form 1040), include the business part of
your deductible home mortgage interest with your total business use of
the home expenses on line 34. You can use the worksheet near the back
of this publication to figure the deductible part of mortgage
interest. Enter the nonbusiness part of the deductible mortgage
interest on Schedule A, lines 10 and 11.
To determine if the limits on qualified home mortgage interest
apply to you, see the instructions for Schedule A or Publication 936.
Real estate taxes.
If you file Schedule C (Form 1040), enter all your deductible real
estate taxes on line 11 of Form 8829. After you have figured the
business part of your taxes on lines 12 and 13, subtract that amount
from your total real estate taxes on line 11. The remainder is
deductible on Schedule A, line 6.
If you file Schedule F (Form 1040), include the business part of
real estate taxes with your total business use of the home expenses on
line 34. Enter the nonbusiness part of your real estate taxes on line
6 of Schedule A.
If you itemize your deductions, be sure to claim only
the personal part of your deductible mortgage interest and real estate
taxes on Schedule A (Form 1040). Do not deduct any of the
business part on Schedule A. For example, if your business
percentage on line 7 of Form 8829 or line 3 of the worksheet near the
back of this publication is 30%, you can claim only 70% of your
deductible mortgage interest and real estate taxes as personal
expenses on Schedule A.
Casualty losses.
If you are using Form 8829, refer to the specific instructions for
lines 9 and 27 and enter the amount from line 33 on line 27 of Form
4684, Section B. Write "See Form 8829" above line 27.
If you file Schedule F (Form 1040), enter the business part of
casualty losses (line 31 if you use the worksheet) on line 27 of Form
4684, Section B. Write "See attached statement" above line 27.
Other expenses.
Report the other home expenses that would not be allowable if you
did not use your home for business (insurance, maintenance, utilities,
depreciation, etc.) on the appropriate lines of your Form 8829. If you
rent rather than own your home, include the rent you paid on line 20.
If these expenses exceed the deduction limit, carry the excess over to
next year. The carryover will be subject to next year's deduction
limit.
If you file Schedule F (Form 1040), include your otherwise
nondeductible expenses (insurance, maintenance, utilities,
depreciation, etc.) with your total business use of the home expenses
on line 34 of Schedule F. If these expenses exceed the deduction
limit, carry the excess over to the next year. The carryover will be
subject to next year's deduction limit.
Business expenses not for the use of your home.
Deduct in full your business expenses that are not for the use of
your home itself (dues, salaries, supplies, certain telephone
expenses, etc.) on the appropriate lines of Schedule C (Form 1040) or
Schedule F (Form 1040). Because these expenses are not for the use of
your home, they are not subject to the deduction limit for business
use of the home expenses.
Employees
As an employee, you must itemize deductions on Schedule A (Form
1040) to claim expenses for the business use of your home and any
other employee business expenses. This generally applies to all
employees, including outside salespersons. If you are a statutory
employee, use Schedule C (Form 1040) to claim the expenses. Follow the
instructions given earlier under Self-Employed Persons. The
"statutory employee" box within box 13 on your Form W-2 will be
checked if you are a statutory employee.
If you have employee expenses for which you were not reimbursed,
report them on line 20 of Schedule A. You generally must also complete
Form 2106 if either of the following apply.
- You claim any travel, transportation, meal, or entertainment
expenses.
- Your employer paid you for any of your job expenses
reportable on line 20. (Amounts your employer included in box 1 of
your Form W-2 are not considered paid by your employer).
However, you can use the simpler Form 2106-EZ, instead of Form
2106, if you meet the following requirements.
- You were not reimbursed for your expenses by your employer,
or if you were reimbursed, the reimbursement was included in box 1 of
your Form W-2.
- If you claim car expenses, you use the standard mileage
rate.
When your employer pays for your expenses using a reimbursement or
allowance arrangement, the payments generally should not be on your
Form W-2 if the following rules for an accountable plan are met.
- You adequately account to your employer for the expenses
within a reasonable time.
- You return any payments not spent for business expenses
(excess reimbursements).
- You must have paid or incurred deductible expenses while
performing services as an employee.
If you meet the accountable plan rules and your business expenses
equal your reimbursement, do not report the reimbursement as income
and do not deduct the expenses.
Adequately accounting to employer.
You adequately account to your employer when you give your employer
documentary evidence of your travel, mileage, and other employee
business expenses, such as receipts, along with an account book,
diary, or similar record in which you entered each expense at or near
the time you had it.
You also may be treated as adequately accounting to your employer
if your employer gives you a per diem or car allowance similar in form
to, and not more than, the federal rate and you verify the time,
place, and business purpose of each expense. For more information, see
the instructions for Form 2106 and Publication 463,
Travel,
Entertainment, Gift, and Car Expenses.
Rental to employer.
If you rent part of your home to your employer and you use the
rented part in performing services for your employer as an employee,
your deduction for the business use of your home is limited. You can
deduct mortgage interest, real estate taxes, and personal casualty
losses for the rented part, subject to any limitations. However, you
cannot deduct otherwise allowable trade or business expenses, business
casualty losses, or depreciation related to the use of your home in
performing services for your employer.
Deductible mortgage interest.
Although you generally can deduct expenses for the business use of
your home on line 20 of Schedule A (Form 1040), do not include any
deductible home mortgage interest on that line. Instead, deduct both
the business and nonbusiness parts of this interest on line 10 or 11
of Schedule A.
If the home mortgage interest you can deduct on lines 10 or 11 is
limited by the home mortgage interest rules, you cannot deduct the
excess as an employee business expense on line 20 of Schedule A, even
though you use part of your home for business. To determine if the
limits on home mortgage interest apply to you, see the instructions
for Schedule A or Publication 936.
Real estate taxes.
Deduct both the business and nonbusiness parts of your real estate
taxes on line 6 of Schedule A. For more information on amounts
allowable as a deduction for real estate taxes, see Publication 530,
Tax Information for First-Time Homeowners.
Casualty losses.
Enter the business part of casualty losses (line 31 of the
worksheet) on line 27 of Form 4684, Section B. Write "See attached
statement" above line 27.
Other expenses.
If you file Form 2106 or Form 2106-EZ, report on line 4 the
following expenses.
- The business part of your otherwise nondeductible expenses
(utilities, maintenance, insurance, depreciation, etc.) that do not
exceed the deduction limit.
- The employee business expenses not related to the use of
your home, such as advertising.
Add these to your other employee business expenses and complete
the rest of the form. Enter the total from Form 2106, or Form 2106-EZ,
on line 20 of Schedule A, where it is subject to the
2%-of-adjusted-gross-income limit. If you do not have to file Form
2106 or Form 2106-EZ, enter your total expenses directly on line 20 of
Schedule A.
Example.
You are an employee who works at home for the convenience of your
employer. You meet all the requirements to deduct expenses for the
business use of your home. Your employer does not reimburse you for
any of your business expenses and you are not otherwise required to
file Form 2106 or Form 2106-EZ.
As an employee, you do not have gross receipts, cost of goods sold,
etc. You begin with gross income from the business use of your home,
which you determine to be $6,000.
The percentage of expenses due to the business use of your home is
20%. You have the following expenses.
| Deductible mortgage interest (20%) |
$1,500 |
| Real estate taxes (20%) |
1,000 |
| Total |
$2,500 |
| Expenses not related to business use of the home
(100%): |
| Supplies |
$500 |
| Advertising |
1,300 |
| Telephone |
200 |
| Total |
$2,000 |
| Otherwise nondeductible expenses: |
| Maintenance (20%) |
$200 |
| Utilities (20%) |
350 |
| Insurance (20%) |
250 |
| Total |
$800 |
| Depreciation (20%) |
$1,600 |
Based on the above expenses, you figure your deduction limit as
follows.
| Gross income |
| $6,000 |
| Less: |
| Deductible mortgage
interest (20%) |
$1,500 |
| Real estate taxes
(20%) |
1,000 |
| Expenses not
related to business use of the home (100%) |
2,000 |
4,500 |
| Deduction limit |
| $1,500 |
Your deduction for otherwise nondeductible expenses and
depreciation is limited to $1,500. You can deduct all your otherwise
nondeductible expenses ($800) and $700 ($1,500 - $800) of your
depreciation.
You deduct your expenses for business use of your home on Schedule
A (Form 1040) as shown in the following table.
| Expense |
Amount |
Schedule A |
| Deductible mortgage interest |
$1,500 |
Line 10 or 11* |
| Real estate taxes |
$1,000 |
Line 6* |
| Expenses not related to the business use of the
home |
$2,000 |
Line 20** |
| Otherwise nondeductible expenses |
$800 |
Line 20** |
| Depreciation |
$700 |
Line 20** |
| *In addition to the 80%
nonbusiness part of the expense. |
| **Subject to the
2%-of-adjusted-gross-income limit. |
You can carry over the $900 of depreciation that exceeds the
deduction limit to next year, subject to the deduction limit for that
year.
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