IRS Form 8829 “Business Use of Home” Explained

The IRS Form 8829, “Expenses for Business Use of Your Home,” is used by taxpayers to claim a deduction for the business use of their home. This includes costs related to the maintenance and operation of the home, such as rent, mortgage interest, property taxes, utilities, insurance, and repairs.

How to Qualify

To qualify for the deduction, the home must be used regularly and exclusively for business purposes. This means that the area of the home used for business must be clearly defined and must not be used for personal purposes. Additionally, the business use of the home must be for the employer’s convenience, not just a matter of personal preference for the taxpayer.

How is Your Deduction Amount Calculated?

The deduction amount is determined by calculating the percentage of the home used for business and applying that percentage to the total expenses related to the home. For example, if a taxpayer uses a room in their home as an office representing 10% of the total square footage, they can claim 10% of their mortgage interest, property taxes, and other expenses as a deduction.
There are limits on the amount of the deduction that can be claimed. The maximum deduction for business use of the home is $1,500 per year. Additionally, if the taxpayer has a loss from the business use of their home, they may be unable to deduct the entire loss in the current year. Any unused loss may be carried forward to future tax years.
It is important to keep accurate records of all expenses related to the business use of the home, as the IRS may request documentation to verify the deduction. This includes receipts, canceled checks, and records of all business-related use of the home.

Requirements and Limitations

The IRS tax code relating to the business use of the home can be found in section 280A of the Internal Revenue Code. This section provides details on the requirements and limitations for claiming the deduction and the rules for calculating the deduction amount.
It is also important to note that if the taxpayer also takes the home office deduction, they must choose between the standard mileage rate or the actual expenses method for business use of the car. The standard mileage rate for business use of the car is 56 cents per mile for 2021, while the actual expenses method allows a taxpayer to deduct the actual costs of operating the car for business purposes.

Summary

The IRS Form 8829 allows taxpayers to claim a deduction for the business use of their home. To qualify, the home must be used regularly and exclusively for business purposes, and the business use must be for the convenience of the employer. The amount of the deduction is based on the percentage of the home used for business and is subject to limits and restrictions. It is important to keep accurate records and documentation of all expenses related to the business use of the home.
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