Tax deductions are one of the benefits of working from home. One can apply for tax deductions using Form 8829. Using IRS Form 8829, you can determine what deductions you are eligible to claim if you can prove them.
Since it’s so easy to abuse home office deductions, the Internal Revenue Service (IRS) looks at them more closely than other portions of your tax return. It would be best to claim if you can prove that your deductions can be verified. Use Beem to get a quick and accurate estimate of your federal and state taxes and get the maximum refund.
Do you prefer to work from home without getting out of your pajamas or get a tax break? The COVID-19 pandemic has forced many of us to work from home, so the deduction applies whether you have worked from home for years or just built an office. In this article, you will learn what form 8829 is and how it helps people working from home or who are self-employed.
What is Form 8829?
For business owners who use their homes for business, IRS Form 8829 lets them claim tax deductions. You can claim a tax break for the use of your home office by completing IRS Form 8829. Form 8829 must be submitted with Schedule C, profit or loss from your business if it qualifies for the home office deduction.
When Do You File Form 8829?
If you are a small business owner or self-employed, you may need to file Form 8829. Your primary business location must be your workplace. It would help if you only used it for business purposes.
A simplified option that allows you to calculate the square footage of your business space is available if you have a small home business. A small home business space does not require filing Form 8829. You can determine the deduction amount using a multiplier of $5 per square foot.
What Kinds of Expenses Can I Deduct on Form 8829?
For deducting home business expenses, the following conditions must be met:
- You are considered to have your principal place of business in the portion of your home exclusively used for business.
- The taxpayer meets with clients, patients, or customers for business purposes.
- As a storage facility or daycare center, the space is used.
Understanding the Eligibility for Form 8829
The standard method of calculating the home office deduction involves completing IRS Form 8829 to determine the actual amount of the deductible expenses. When calculating expenses, the first step is to divide the square footage of the workplace by the overall square footage of the home.
A home office deduction cannot be claimed if the workspace is used for business and personal use. The deduction cannot be claimed if the workspace is used for business and personal use. It’s essential to be accurate in case of audits since even if you have a workspace in your living room, you can still claim some of the room.
What Does Form 8829 Look Like?
The use of one’s home as a business office can be deducted on Form 8829 by self-employed individuals. Deduction amounts are calculated in two ways. The simplified method, discussed in more detail below, eliminates the need for Form 8829 and goes directly on Schedule C, the sole proprietor profit or loss tax form. Your home can be used for business purposes in a percentage calculated by the form.
How to Fill Out Form 8829
Form 8829 is only one page long but asks many questions. You can justify using what could otherwise be a living space for an office if you take advantage of the home office deduction.
Calculate the Business Area of Your Home
On Form 8829, you must enter the square footage of your home and office. Using a tape measure for this part of the form is a good idea.
Calculate the Allowable Deduction
The second part of Form 8829 asks you to list all the deductible expenses associated with your home. Form 8829 invites you to subtotal the expenses every few lines, then multiply that number by the business percentage listed.
Calculate Home Depreciation
Almost every fixed asset in a business is subject to depreciation, which reduces taxable income. Your home can be depreciated for the business portion of your home, making it a part of your business income.
Conclusion
Nowadays, every coffee shop and hotel, even in smaller towns, has free wifi. Virtual meetings have been available for over a decade, and internet service is more affordable and widely available than ever.
There are more economic opportunities for people if more people start more businesses, which is excellent for the economy. You can use IRS form 8829 to tell the federal government how much you spent on your home office and how much you are entitled to deduct from your taxes, so it is one of the most valuable tax forms for freelancers. Check out Beem Tax Calculator to get a quick and accurate estimate of your federal and state tax refund.
FAQ’s
Who files form 8829?
Self-employed taxpayers or small business owners may need to file Form 8829 to claim the home office deduction.
What is 8829 business use of home?
Self-employed taxpayers who use their home space for business purposes can use Form 8829 to calculate their allowed expenses.
Where does Form 8829 flow to?
Form 8829 is only generated when you choose Schedule C from the For drop-down menu at the top of the screen. You should file only with Schedule C (Form 1040) and use a separate Form 8829 for each home you used for business during the year.
