IRS Form 8829 – As more people embrace remote work and self-employment, understanding tax deductions for home office use has become essential. If you’re self-employed and use part of your home for business, IRS Form 8829 can help you calculate and claim deductions for related expenses. This form is filed with your Schedule C (Form 1040) when reporting business income and expenses. In this comprehensive guide, we’ll break down what Form 8829 is, who qualifies, how to fill it out step by step, and key updates for the 2025 tax year (filed in 2026). Whether you’re a freelancer, consultant, or small business owner, maximizing this deduction can significantly reduce your taxable income.
What Is IRS Form 8829?
IRS Form 8829, titled “Expenses for Business Use of Your Home,” is used by self-employed individuals to compute the allowable deduction for using a portion of their home for business purposes. It allows you to deduct a share of home-related expenses like utilities, rent, or mortgage interest based on the business percentage of your home. The form also handles carryovers of unallowed expenses to future years and depreciation calculations.
This deduction is reported on line 30 of Schedule C (Form 1040). Note that employees (those receiving a W-2) cannot claim this deduction under current rules from the Tax Cuts and Jobs Act, which remain in effect through 2025. For partnerships or Schedule F filers (farmers), alternative worksheets in Publication 587 apply instead.
The form is divided into four parts:
- Part I: Calculates the business use percentage.
- Part II: Figures your allowable deduction, including direct and indirect expenses.
- Part III: Computes depreciation on the business portion of your home.
- Part IV: Determines carryover amounts for unallowed expenses.
You can download the latest version of Form 8829 from the IRS website: https://www.irs.gov/pub/irs-pdf/f8829.pdf.
Who Qualifies for the Home Office Deduction Using Form 8829?
To claim this deduction, your home office must meet strict IRS criteria. The space must be used exclusively and regularly for business as:
- Your principal place of business (where you perform administrative or management activities, with no other fixed location for these tasks).
- A place to meet clients, patients, or customers.
- A separate structure (like a garage or studio) not attached to your home.
Exceptions to the exclusivity rule include:
- Storage of inventory or product samples if your home is your only fixed business location.
- Daycare facilities that comply with state licensing requirements.
You cannot use Form 8829 if:
- You’re an employee.
- All expenses are allocable to inventory costs.
- You’re electing the simplified method for the same home (more on this below).
If you used the simplified method in 2024 but switch to actual expenses in 2025, you can carry over prior unallowed expenses. Always ensure the deduction doesn’t exceed your business’s gross income after other deductions.
Actual Expenses Method vs. Simplified Method: Which Should You Choose?
The IRS offers two ways to calculate your home office deduction: the actual expenses method (using Form 8829) or the simplified method.
Actual Expenses Method
This involves tracking and prorating your home’s actual costs based on the business percentage (e.g., square footage). It’s ideal if your home office is large or you have high expenses like mortgage interest. Use Form 8829 to itemize.
Pros: Potentially higher deduction. Cons: Requires detailed records and depreciation calculations.
Simplified Method
Deduct $5 per square foot of home office space (up to 300 sq ft, max $1,500). No Form 8829 needed—report directly on Schedule C. You can still deduct full home-related itemized expenses (like mortgage interest) on Schedule A.
Pros: Easier recordkeeping, no depreciation. Cons: Capped at $1,500; can’t carry over unallowed expenses.
Choose based on your situation: Opt for actual if expenses exceed the simplified cap. You can’t mix methods for the same home in one year.
Step-by-Step Guide: How to Fill Out IRS Form 8829
Filling out Form 8829 requires accurate measurements and expense records. Here’s a detailed walkthrough.
Part I: Part of Your Home Used for Business
- Line 1: Enter the square footage used exclusively for business (or for daycare/storage).
- Line 2: Enter your home’s total square footage.
- Line 3: Divide line 1 by line 2 (business percentage).
- Lines 4-6 (Daycare only): Calculate daycare usage percentage based on days/hours operated.
- Line 7: Final business percentage (line 3, or adjusted for daycare).
Use square feet or another reasonable method for accuracy.
Part II: Figure Your Allowable Deduction
Separate expenses into direct (business-only) and indirect (whole-home, prorated).
- Line 8: Enter from Schedule C, line 29, plus gains/minus non-home losses from business use.
- Lines 9-22: List expenses in columns (a) direct and (b) indirect, including casualty losses, mortgage interest, taxes, rent, repairs, utilities, and more.
- Lines 23-26: Total and prorate indirect expenses; add carryover from prior year.
- Lines 27-28: Determine allowable amounts based on income limits.
- Lines 29-33: Add excess losses, depreciation (from Part III), and prior carryovers.
- Line 34-36: Total allowable deduction; subtract casualty portion; report on Schedule C, line 30.
Part III: Depreciation of Your Home
- Line 37: Smaller of adjusted basis or fair market value.
- Line 38: Land value (subtract from line 37).
- Line 39-40: Building basis, then business portion (multiply by line 7).
- Line 41: Depreciation percentage from instructions (e.g., 2.461% for January placement).
- Line 42: Allowable depreciation (enter on line 30 of Part II).
Attach Form 4562 if it’s your first year or you have additions.
Part IV: Carryover of Unallowed Expenses
- Line 43: Operating expenses carryover (line 26 minus line 27).
- Line 44: Excess losses/depreciation carryover (line 32 minus line 33).
Carry these to your 2026 Form 8829.
Common Expenses You Can Deduct on Form 8829
Deductible items include the business portion of:
- Mortgage interest and real estate taxes (subject to SALT limits).
- Rent, utilities, insurance, repairs, and maintenance.
- Casualty losses and other operating costs.
For 2025, the state and local tax (SALT) deduction limit is increased to $40,000 ($20,000 if married filing separately), affecting lines 10, 11, and 17. Use worksheets in the instructions for allocations if needed.
Depreciation, Limits, and Carryovers
Depreciation is based on the business basis of your home (excluding land) using residential rates. The deduction is limited to your business’s net income after other expenses—excess amounts carry over. Prorate for part-year use.
Common Mistakes to Avoid When Using Form 8829
- Not meeting exclusivity/regularity tests.
- Overstating business percentage.
- Forgetting carryovers or depreciation.
- Mixing methods or claiming as an employee.
- Poor recordkeeping—keep receipts and measurements for audits.
Frequently Asked Questions About IRS Form 8829
Can I claim the home office deduction if I rent my home?
Yes, include rent on line 19.
What if my home office is in a separate structure?
It qualifies if used exclusively for business.
How does the 2025 SALT limit change affect Form 8829?
The increased limit ($40,000) may allow higher deductions for taxes and interest, but use the provided worksheet if your MAGI exceeds thresholds.
Do I need to file Form 8829 every year?
Only if using the actual method and qualifying.
For more details, consult IRS Publication 587 or a tax professional.
Final Thoughts on Maximizing Your Home Office Deduction
IRS Form 8829 offers a valuable way to lower your tax bill by deducting home business expenses, but accuracy is key to avoid audits. With updates like the higher SALT limit for 2025, now’s the time to review your eligibility. Always use official IRS resources and consider professional advice for complex situations. By following this guide, you can confidently claim what you’re entitled to and keep more of your hard-earned money.