Form 8829 is used to calculate the allowable expenses for the business use of your home for taxpayers filing Schedule C (Form 1040) as sole proprietors. This form determines the deductible portion of home-related expenses (such as mortgage interest, real estate taxes, utilities, insurance, repairs, and depreciation) based on the percentage of the home used for business. The allowable deduction is subject to a gross income limitation. If total expenses exceed the allowable limit, Part IV of the form is used to compute the disallowed expenses that are carried forward to the next tax year (2026 for 2025 returns). A separate Form 8829 must be completed for each qualifying home used for business during the year.
Who Can Use Form 8829
- Self-employed individuals (sole proprietors) filing Schedule C (Form 1040) who use part of their home for business.
- Taxpayers who meet the IRS requirements for the home office deduction, including exclusive and regular use, unless an exception applies.
Who Cannot Use Form 8829
- Partners — home office expenses are generally claimed as unreimbursed partnership expenses (UPE) if permitted, not on Form 8829.
- Employees with home office expenses — these are not deductible on federal returns for tax years 2018 through 2025.
- Taxpayers whose home office expenses are fully allocable to inventory costs — such costs are included in Schedule C, Part III (Cost of Goods Sold).
- Taxpayers who elect the simplified method for a qualified business use of the home — Form 8829 is not used for that year; the simplified method may be applied to only one home per business per year.
Eligibility Requirements for Business Use
To qualify for the deduction, the business use of the home must meet one of the following:
- Principal place of business: Used exclusively and regularly for administrative or management activities of the trade or business, and there is no other fixed location where such activities are substantially performed.
- Place of meeting clients: Used regularly to meet or deal with patients, clients, or customers in the normal course of business.
- Separate structure: A structure not attached to the dwelling unit used in connection with the trade or business.
- Storage of inventory or product samples: Used on a regular basis for storage of inventory or product samples if the home is the only fixed location of the business (exclusive use not required for this exception).
Expenses That Can Be Deducted
Only direct or indirect expenses allocable to business use of the home may be entered on Form 8829. Examples include:
- Mortgage interest
- Property taxes
- Utilities
- Repairs and maintenance
- Insurance
Expenses not allocable to business use (e.g., salaries, supplies, advertising) should be reported on Schedule C, not Form 8829.
Special Considerations
- Tax-exempt income: Expenses allocable to tax-exempt income (such as certain housing allowances) are generally not deductible, except for otherwise allowable mortgage interest and real estate taxes.
- Part-year use: If the home was used for business for only part of the year, only expenses attributable to the period of qualified business use are deductible.
- Carryover: Disallowed expenses due to the gross income limitation are carried forward to the next tax year (2026 for 2025 returns), subject to ordering rules.
- Depreciation recapture: Depreciation claimed for the business use of the home reduces the basis of the property and may be subject to recapture upon disposition of the home.
Source:
Form 8829 Instructions (2025)
Disclaimer: Always verify details with current IRS forms, instructions, and publications. For complex situations, consult a CPA or tax attorney.