After you determine that you meet the tests under Qualifying for a Deduction, you can begin to figure how much you can deduct. You will need to figure the percentage of your home used for business and the limit on the deduction.
If you are an employee or a partner, or you file Schedule F (Form 1040), Profit or Loss From Farming, use the Worksheet To Figure the Deduction for Business Use of Your Home, near the end of this publication, to help figure your deduction. If you file Schedule C (Form 1040), Profit or Loss From Business, you must generally use Form 8829, Expenses for Business Use of Your Home. The Schedule C Example, near the end of this publication, shows how to report the deduction on Form 8829.taxmap/pubs/p587-001.htm#en_us_publink100013751
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, qualified mortgage insurance premiums, 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.taxmap/pubs/p587-001.htm#en_us_publink100013752
To find the business percentage, compare the size of the part of your home that you use for business to your whole house. Use the resulting percentage to figure the business part of the expenses for operating your entire home.
You can use any reasonable method to determine the business percentage. The following are two commonly used methods for figuring the percentage.
- Divide the area (length multiplied by the width) used for business by the total area of your home.
- If the rooms in your home are all about the same size, you can divide the number of rooms used for business by the total number of rooms in your home.
- Your office is 240 square feet (12 feet × 20 feet).
- Your home is 1,200 square feet.
- Your office is 20% (240 ÷ 1,200) of the total area of your home.
- Your business percentage is 20%.
- You use one room in your home for business.
- Your home has 10 rooms, all about equal size.
- Your office is 10% (1 ÷ 10) of the total area of your home.
- Your business percentage is 10%.
Use lines 1–7 of Form 8829, or lines 1–3 on the Worksheet To Figure the Deduction for Business Use of Your Home (near the end of this publication) to figure your business percentage.
You cannot deduct expenses for the business use of your home incurred during any part of the year you did not use your home for business purposes. For example, if you begin using part of your home for business on July 1, and you meet all the tests from that date until the end of the year, consider only your expenses for the last half of the year in figuring your allowable deduction.taxmap/pubs/p587-001.htm#en_us_publink100013757
If your gross income from the business use of your home equals or exceeds your total business expenses (including depreciation), you can deduct all your business expenses related to the use of your home.
If your gross income from the business use of your home is less than your total business expenses, your deduction for certain expenses for the business use of your home is limited.
Your deduction of otherwise nondeductible expenses, such as insurance, utilities, and depreciation (with depreciation taken last), that are allocable to the business, is limited to the gross income from the business use of your home minus the sum of the following.
- The business part of expenses you could deduct even if you did not use your home for business (such as mortgage interest, real estate taxes, and casualty and theft losses that are allowable as itemized deductions on Schedule A (Form 1040)). These expenses are discussed in detail under Deducting Expenses, later.
- The business expenses that relate to the business activity in the home (for example, business phone, supplies, and depreciation on equipment), but not to the use of the home itself.
If you are self-employed, do not include in (2) above your deduction for half of your self-employment tax.
If your deductions are greater than the current year's limit, you can carry over the excess to the next year. They are subject to the deduction limit for that year, whether or not you live in the same home during that year. taxmap/pubs/p587-001.htm#en_us_publink100013759
If you are an employee or a partner, or you file Schedule F (Form 1040), use the Worksheet To Figure the Deduction for Business Use of Your Home, near the end of this publication. If you file Schedule C (Form 1040), figure your deduction limit and carryover on Form 8829.taxmap/pubs/p587-001.htm#en_us_publink100013760
You meet the requirements for deducting expenses for the business use of your home. You use 20% of your home for business. In 2008, your business expenses and the expenses for the business use of your home are deducted from your gross income in the following order.
|Gross income from business||$6,000|
|Deductible mortgage interest|
and real estate taxes (20%)
|Business expenses not related to the use of your home (100%) (business phone, supplies, and depreciation on equipment)||2,000|
|Minus other expenses allocable to business use of home:|| |
|Maintenance, insurance, and utilities (20%)||800|
|Depreciation allowed (20% = $1,600 allowable, but subject to balance of deduction limit)||200|
|Other expenses up to the deduction limit||$1,000|
|Depreciation carryover to 2009 ($1,600 − $200) (subject to deduction limit in 2009) ||$1,400|
You can deduct all of the business part of your deductible mortgage interest and real estate taxes ($3,000). You also can deduct all of your business expenses not related to the use of your home ($2,000). Additionally, you can deduct all of the business part of your expenses for maintenance, insurance, and utilities, because the total ($800) is less than the $1,000 deduction limit. Your deduction for depreciation for the business use of your home is limited to $200 ($1,000 minus $800) because of the deduction limit. You can carry over the $1,400 balance and add it to your depreciation for 2009, subject to your deduction limit in 2009.taxmap/pubs/p587-001.htm#en_us_publink100013761
If part of the gross income from your trade or business is from the business use of part of your home and part is from a place other than your home, you must determine the part of your gross income from the business use of your home before you figure the deduction limit. In making this determination, consider the time you spend at each location, the business investment in each location, and any other relevant facts and circumstances.
If your home office qualifies as your principal place of business, you can deduct your daily transportation costs between your home and another work location in the same trade or business. For more information on transportation costs, see Publication 463, Travel, Entertainment, Gift, and Car Expenses.