skip navigation

Search Help
Navigation Help


Main Topics
A B C D E F G H I
J K L M N O P Q R
S T U V W X Y Z #


FAQs
Forms
Publications
Tax Topics


Comments
About Tax Map

previous page Previous Page: Publication 587 - Business Use of Your Home (Including Use by Day-Care Providers) - Where To Deduct
next page Next Page: Publication 587 - Business Use of Your Home (Including Use by Day-Care Providers) - Instructions for the Worksheet
 Use previous pagenext page to find additional occurrences of topic items.Index for this Publication
taxmap/pubs/p587-009.htm#en_us_publink100013844

Schedule C Example(p21)


rule
spacer

The filled-in forms for John Stephens that follow show how to report deductions for the business use of your home if you file Schedule C (Form 1040).
taxmap/pubs/p587-009.htm#en_us_publink100013845

Form 4562.(p21)


rule
spacer

Based on the following facts, John completes Form 4562 as follows:
taxmap/pubs/p587-009.htm#en_us_publink100013846

Part I, lines 1–13.(p21)
spacer

John began using his home for business in January of this year. He purchased a new computer and filing cabinet to use in his business. The computer, used 100% for business, cost $3,200. The filing cabinet cost $600. John elects to take the section 179 deduction for both items.
John completes Part I of Form 4562. He enters the cost of both the computer and filing cabinet, $3,800, on line 2 and completes lines 4 and 5. On line 6, he enters a description of each item, its cost, and the cost he elects to expense. Line 11 is the smaller of line 5 ($125,000) or the taxable income from all trades and businesses without regard to the section 179 deduction. Since he has no other business income, he adds line 31 of Schedule C and the amount of the section 179 deduction ($3,800) for a total business income of $27,871. This amount goes on line 11 since it is smaller than $125,000. He enters $3,800 on line 12.
taxmap/pubs/p587-009.htm#en_us_publink100013847

Part III, line 19c.(p21)
spacer

John converted to business use a desk and chair (furniture) he had purchased in 2001 for personal purposes. In 2001, he paid $1,500 for them. The total fair market value in 2008 is $550. The fair market value is less than the cost, so his depreciable basis is $550.
Because the furniture is 7-year property under MACRS, John enters $550 in Part III, line 19c, column (c). He completes columns (d) through (f). He uses Table 4 in this publication or Table A-1 in Publication 946 to find the rate of 14.29% for property placed in service during the first month of the year. He multiplies $550 by 14.29% (.1429) and enters $79 in column (g).
taxmap/pubs/p587-009.htm#en_us_publink100013848

Part III, line 19i.(p21)
spacer

This is the first year John used his home for business, so he must figure the depreciation on line 19i. On line 19i, column (c), he enters $11,000, the depreciable basis of the business part of his home. He began using his home for business in January. (For a discussion on how he figures his depreciation deduction, see Step 3 under Form 8829, Part II, later.) He enters $271 in column (g).
taxmap/pubs/p587-009.htm#en_us_publink100013849

Part IV, line 22.(p21)
spacer

John totals the amounts on line 12 and line 19 in column (g) and enters the total on line 22. He enters both the section 179 deduction ($3,800) and the depreciation on the furniture ($79) on line 13 of Schedule C. He enters the depreciation on his home ($271) on Form 8829, line 29.
taxmap/pubs/p587-009.htm#en_us_publink100013850

Schedule C.(p21)


rule
spacer

John completes Schedule C as follows:
taxmap/pubs/p587-009.htm#en_us_publink100013851

Line 13.(p21)
spacer

As discussed previously, John enters the amount from Form 4562 for his section 179 deduction ($3,800) and the depreciation deduction for his office furniture ($79) for a total of $3,879.
taxmap/pubs/p587-009.htm#en_us_publink100013852

Line 16b.(p21)
spacer

This amount is the interest on installment payments for the business assets John uses in his home office.
taxmap/pubs/p587-009.htm#en_us_publink100013853

Line 25.(p21)
spacer

John had a separate telephone line in his home office that he used only for business. He can deduct $347 for the line.
taxmap/pubs/p587-009.htm#en_us_publink100013854

Lines 28–30.(p21)
spacer

On line 28, he totals all his expenses other than those for the business use of his home, and then subtracts that total from his gross income. He uses the result on line 29 to figure the deduction limit on his expenses for the business use of his home. He enters that amount on Form 8829, line 8, and then completes the form. He enters the amount of his home office deduction from Form 8829, line 35, on Schedule C, line 30.
taxmap/pubs/p587-009.htm#en_us_publink100013855

Form 8829, Part I.(p21)


rule
spacer

John uses one room of his home exclusively and regularly to meet clients. In Part I of Form 8829 he shows that, based on the square footage, the room is 10% of the total area of his home.
taxmap/pubs/p587-009.htm#en_us_publink100013856

Form 8829, Part II.(p21)


rule
spacer

John uses Part II of Form 8829 to figure his allowable home office deduction.
taxmap/pubs/p587-009.htm#en_us_publink100013857

Step 1.(p21)
spacer

First, he figures the business part of expenses that would be deductible even if he did not use part of his home for business. These expenses ($4,500 deductible mortgage interest and $1,000 real estate taxes) relate to his entire home, so he enters them in column (b) on lines 10 and 11. He then subtracts the $550 business part of these expenses (line 14) from his tentative business profit (line 8). The result, $25,002 on line 15, is the most he can deduct for his other home office expenses.
taxmap/pubs/p587-009.htm#en_us_publink100013858

Step 2.(p21)
spacer

Next, he figures his deduction for operating expenses. He paid $300 to have his office repainted. He enters this amount on line 19, column (a) because it is a direct expense. All his other expenses ($400 homeowner's insurance, $1,400 roof repairs, and $1,800 gas and electric) relate to his entire home. Therefore, he enters them in column (b) on the appropriate lines. He adds the $300 direct expenses (line 22, column (a)) to the $360 total for indirect expenses (line 23) and enters the total, $660, on line 25. This amount is less than his deduction limit, so he can deduct it in full. The $24,342 balance of his deduction limit (line 27) is the most he can deduct for depreciation.
taxmap/pubs/p587-009.htm#en_us_publink100013859

Step 3.(p22)
spacer

Next, he figures his allowable depreciation deduction for the business use of his home in Part III of Form 8829. The adjusted basis of his home is $130,000, which is less than the fair market value of $160,000. He figures the value of the land to be $20,000. He subtracts the land value from the adjusted basis. He multiplies the result ($110,000) by the percentage on line 7 to get the depreciable basis of the business part of his home ($11,000).
He began using the office in January of this year, so he uses Table 2 in this publication or Table A-7a in Appendix A of Publication 946. The depreciation percentage for the first year of the recovery period for assets placed in service in the first month is 2.461%. His depreciation deduction for 2008 (line 41) is $271 (.02461 × $11,000). He enters that amount in Part II on lines 29 and 31. This is less than the available balance of his deduction limit (line 27), so he can deduct the full amount as depreciation. John also must complete Form 4562 for 2008, so he enters $271 on line 19i, column (g). See Form 4562, earlier.
taxmap/pubs/p587-009.htm#en_us_publink100013860

Step 4.(p22)
spacer

Finally, he figures his total deduction for his home office by adding together his otherwise deductible expenses (line 14), his operating expenses (line 26), and depreciation (line 32). He enters the result, $1,481, on lines 33 and 35, and on Schedule C, line 30.
taxmap/pubs/p587-009.htm#en_us_publink100013861
taxmap/pubs/p587-009.htm#TXMP7354f8b6
John Stephen's—Schedule C Text DescriptionJohn Stephen's—Schedule C  
taxmap/pubs/p587-009.htm#en_us_publink100013862
taxmap/pubs/p587-009.htm#TXMP72969283
John Stephen's—Form 8829 Text DescriptionJohn Stephen's—Form 8829  
taxmap/pubs/p587-009.htm#en_us_publink100013863
taxmap/pubs/p587-009.htm#TXMP70d02cdc
John Stephen's—Form 4562 Text DescriptionJohn Stephen's—Form 4562  
taxmap/pubs/p587-009.htm#w15154t01
Pencil
Worksheet To Figure the Deduction for Business Use of Your Home
Use this worksheet if you file Schedule F (Form 1040) or you are an employee or a partner.
PART 1—Part of Your Home Used for Business:  
1)Area of home used for business1)             
2)Total area of home2)             
3)Percentage of home used for business (divide line 1 by line 2 and show result as percentage)3)            %
PART 2—Figure Your Allowable Deduction   
4)Gross income from business (see instructions)4)             
   (a)
Direct Expenses
 (b)
Indirect Expenses
   
5)Casualty losses5)                            
6)Deductible mortgage interest and qualified mortgage insurance premiums6)                            
7)Real estate taxes7)                            
8)Total of lines 5 through 78)                            
9)Multiply line 8, column (b), by line 39)               
10)Add line 8, column (a), and line 910)               
11)Business expenses not from business use of home (see instructions)11)               
12)Add lines 10 and 1112)             
13)Deduction limit. Subtract line 12 from line 413)             
14)Excess mortgage interest and qualified mortgage insurance premiums14)                            
15)Insurance15)                            
16)Rent16)                            
17)Repairs and maintenance17)                            
18)Utilities18)                            
19)Other expenses19)                            
20)Add lines 14 through 1920)                            
21)Multiply line 20, column (b) by line 321)               
22)Carryover of operating expenses from prior year (see instructions)22)               
23)Add line 20, column (a), line 21, and line 2223)             
24)Allowable operating expenses. Enter the smaller of line 13 or line 23 24)             
25)Limit on excess casualty losses and depreciation. Subtract line 24 from line 1325)             
26)Excess casualty losses (see instructions)26)               
27)Depreciation of your home from line 39 below27)               
28)Carryover of excess casualty losses and depreciation from prior year (see instructions)28)               
29)Add lines 26 through 2829)             
30)Allowable excess casualty losses and depreciation. Enter the smaller of line 25 or line 29 30)             
31)Add lines 10, 24, and 3031)             
32)Casualty losses included on lines 10 and 30 (see instructions)32)             
33)Allowable expenses for business use of your home. (Subtract line 32 from line 31.) See instructions for where to enter on your return 33)             
PART 3—Depreciation of Your Home 
34)Smaller of adjusted basis or fair market value of home (see instructions)34)             
35)Basis of land35)             
36)Basis of building (subtract line 35 from line 34)36)             
37)Business basis of building (multiply line 36 by line 3)37)             
38)Depreciation percentage (from applicable table or method)38)            %
39)Depreciation allowable (multiply line 37 by line 38)39)             
PART 4—Carryover of Unallowed Expenses to Next Year 
40)Operating expenses. Subtract line 24 from line 23. If less than zero, enter -0-40)             
41)Excess casualty losses and depreciation. Subtract line 30 from line 29. If less than zero, enter -0-41)             
previous pagePrevious Page: Publication 587 - Business Use of Your Home (Including Use by Day-Care Providers) - Where To Deduct
next pageNext Page: Publication 587 - Business Use of Your Home (Including Use by Day-Care Providers) - Instructions for the Worksheet
 Use previous pagenext page to find additional occurrences of topic items.Index for this Publication