Home office Expenses
Business owners may qualify to claim the home office deduction if they have their own business (Sch C) and use a portion of their home. The home office deduction Form 8829 is available to both homeowners and renters and any carryover to next tax period of amount not deductible in current tax period. There are certain expenses taxpayers can deduct. They include mortgage interest, insurance, utilities, repairs, maintenance, depreciation and rent. Taxpayers must meet specific requirements to claim home expenses as a deduction and taxpayer cannot claim all expenses as deduction.
The taxpayer also claim the deduction that apply to space within your home used on a regular basis to store inventory or product samples from your trade or business of selling products at retail or wholesale. Your home must be the only fixed location of your trade or business. In some situation taxpayer cannot use Form 8829 such as claiming expenses as partner or claiming these expenses under schedule F, expenses of business use must allocable to inventory cost and you can use more than one home for business, you can claim only one home.
Taxpayer also claims the deduction for the space using daycare, even though taxpayer uses the same space for non business purpose. If you want to get the daycare deduction you want to take permission or approval of daycare center under state law.
The Form 8829 consisted total four parts. In the First part of the Form 8829 reports Home used for business.
⦁ In First line of part one reports business space used for exclusively for business use
⦁ Second line reports total square feet of home and third line reports total output of line one and two.
⦁ Fourth column reports total hours used for daycare exclusively and Fifth column reports started or stopped using your home for daycare in 2021, you must prorate the number of hours based on the number of days the home was available for daycare
The Part II of Form 8829 reports Allowable deduction.
All the gross income of business from the use of home and gain from form 8949 or Form 4797 shows under line 8 of Part II and less the any loss from Form 8949 and 4797 that is allocable to the trade or business in which you use your home but is not allocable to the use of the home. And line number 9 to line 36 reports direct and indirect expenses exclusively for business use of home. If you not operate the business entire year, you can deduct only the expenses paid or incurred for the portion of the year you used your home for business
Direct expenses can use exclusively for business part of your home of specific area or rooms can claim the 100% of your direct expenses. And also indirect expenses are for keeping up and running your entire home and it benefits both business and personal home.
Part III and Part IV reports Depreciation and carryover of unhallowed expenses.