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. The following instructions explain how to complete each part of the worksheet.taxmap/pubs/p587-010.htm#en_us_publink100013865
See Partners, under Where To Deduct, earlier, before completing the worksheet.
If you file Schedule C (Form 1040), use Form 8829 to figure the deductions and attach the form to your return.
If you figure the percentage based on area, use lines 1 through 3 to figure the business-use percentage. Enter the percentage on line 3.
You can use any other reasonable method that accurately reflects your business-use percentage. If you operate a daycare facility and you meet the exception to the exclusive use test for part or all of the area you use for business, you must figure the business-use percentage for that area as explained under Daycare Facility, earlier. If you use another method to figure your business percentage, skip lines 1 and 2 and enter the percentage on line 3.taxmap/pubs/p587-010.htm#en_us_publink100013869taxmap/pubs/p587-010.htm#en_us_publink100013870
If you file Schedule F, enter your total gross income that is related to the business use of your home. This generally would be the amount on line 11 of Schedule F.
If you are an employee, enter your total wages that are related to the business use of your home.taxmap/pubs/p587-010.htm#en_us_publink100013871
Enter only the amounts that would be deductible whether or not you used your home for business (that is, amounts allowable as itemized deductions on Schedule A (Form 1040) or amounts for real estate taxes and net disaster loss by which you can increase your standard deduction.
Generally (disaster) waivers include only the part of a casualty loss that exceeds $100 plus 10% of adjusted gross income.
If you file Schedule F or are a partner, treat qualified mortgage insurance premiums as personal expenses for this step. Figure the amount to include on line 6 by completing Schedule A, line 13, in accordance with the instructions on page A-7 of the Schedule A (Form 1040) instructions. However, when figuring your adjusted gross income (Form 1040, line 38) for this purpose, exclude the gross income from business use of your home and the deductions attributable to that income. Include on line 6 the amount from Schedule A, line 13. See Lines 14-22 below to deduct part of the qualified mortgage insurance premiums not allowed because of the adjusted gross income limit. Do not file or use that Schedule A to figure the amount to deduct on line 13 of that schedule. Instead, complete a separate Schedule A to deduct the personal portion of your qualified mortgage insurance premiums.
Under column (a), Direct Expenses, enter expenses that benefit only the business part of your home. Under column (b), Indirect Expenses, enter expenses that benefit the entire home. You generally enter 100% of the expense. However, if the business percentage of an indirect expense is different from the percentage on line 3, enter only the business part of the expense on the appropriate line in column (a), and leave that line in column (b) blank.taxmap/pubs/p587-010.htm#en_us_publink100013872
Multiply your total indirect expenses (line 8, column (b)) by the business percentage from line 3. Enter the result on line 9. Add this amount to the total direct expenses (line 8, column (a)) and enter the total on line 10.taxmap/pubs/p587-010.htm#en_us_publink100013873
Enter any other business expenses that are not attributable to business use of the home on line 11. For employees, examples include travel, supplies, and business telephone expenses. Farmers generally should enter their total farm expenses before deducting office in the home expenses. Do not enter the deduction for one-half of your self-employment tax. Add the amounts on lines 10 and 11, and enter the total on line 12. Subtract line 12 from line 4, and enter the result on line 13. This is your deduction limit. You use it to determine whether you can deduct any of your other expenses for business use of the home this year. If you cannot, you will carry them over to next year.
If line 13 is zero or less, enter zero. Deduct your expenses for deductible home mortgage interest, qualified mortgage insurance premiums, real estate taxes, casualty losses, and any business expenses not attributable to use of your home on the appropriate lines of the schedule(s) for Form 1040 as explained earlier under Where To Deduct.taxmap/pubs/p587-010.htm#en_us_publink100013874
On lines 14 through 19, enter your otherwise nondeductible expenses for the business use of your home. These include utilities, insurance, repairs, and maintenance. If you rent, report the amount paid on line 16. If you file Schedule F, include any part of your home mortgage interest or qualified mortgage insurance premiums that is more than the limits given in Publication 936. (If you are an employee, do not enter any excess home mortgage interest or qualified mortgage insurance premiums.) In column (a), enter the expenses that benefit only the business part of your home (direct expenses). In column (b), enter the expenses that benefit the entire home (indirect expenses). Multiply line 20, column (b) by the business-use percentage (line 3) and enter this amount on line 21.
If you claimed a deduction for business use of your home on your 2007 tax return, enter the amount from line 40 of your 2007 worksheet on line 22.taxmap/pubs/p587-010.htm#en_us_publink100013875
On lines 25 through 30, figure your limit on deductions for excess casualty losses and depreciation.
On line 26, figure the excess casualty loss by multiplying the business use percentage from line 3 by the part of casualty losses that would not be allowable if you did not use your home for business (i.e., the casualty losses in excess of the amount on line 5).
On line 27, enter the depreciation deduction from Part 3.
If you claimed a deduction for business use of your home on your 2007 tax return, enter on line 28 the amount from line 41 of your 2007 worksheet.
On lines 29 and 30, figure your allowable excess casualty losses and depreciation.taxmap/pubs/p587-010.htm#en_us_publink100013876
On line 31, total all allowable business use of the home deductions.
On line 32, enter the total of the casualty losses shown on lines 10 and 30. Enter the amount from line 32 on line 33 of Form 4684, Section B. See the instructions for Form 4684 for more information on completing that form.
Line 33 is the total (other than casualty losses) allowable as a deduction for business use of your home. If you file Schedule F (Form 1040), enter this amount on line 34, Other expenses, of Schedule F and enter "Business Use of Home" on the line beside the entry. Do not add the specific expenses into other line totals of Part II of Schedule F.
If you are an employee or partner, see Where To Deduct, earlier, for information on how to claim the deduction.taxmap/pubs/p587-010.htm#en_us_publink100013877
Figure your depreciation deduction on lines 34 through 39. On line 34, enter the smaller of the adjusted basis or the fair market value of the property at the time you first used it for business. Do not adjust this amount for changes in basis or value after that date. Allocate the basis between the land and the building on lines 35 and 36. You cannot depreciate any part of the land. On line 38, enter the correct percentage for the current year from the tables in Publication 946. Multiply this percentage by the business basis to get the depreciation deduction. Enter this figure on lines 39 and 27. Complete and attach Form 4562 to your return if this is the first year you used your home, or an improvement or addition to your home, in business.taxmap/pubs/p587-010.htm#en_us_publink100013878
Complete these lines to figure the expenses that must be carried forward to next year.