Form 8829 is the actual-expense home office form. If you've decided actual is better than the simplified method (here's how to choose), this is the form you fill in.
The form has four parts. Part I is the easy math (square footage). Part II is the expense allocation (where most of the work is). Part III handles depreciation. Part IV carries forward losses.
Part I — Part of your home used for business
Line 1: Square footage of the area used regularly and exclusively for business.
Line 2: Total square footage of the home.
Line 3: Line 1 ÷ Line 2 = business-use percentage.
This is the percentage that gets applied to indirect expenses in Part II.
Special case for daycare providers: Lines 4–7 compute a time-based percentage instead. If you're not in daycare, ignore them and put the line 3 percentage on line 7.
Part II — Figure your allowable deduction
This is the meat. The form distinguishes between two expense categories:
- Direct expenses — costs that apply only to the business space (e.g., painting your home office)
- Indirect expenses — costs that benefit the whole home (mortgage interest, utilities, etc.)
Direct expenses are 100% deductible. Indirect expenses are deductible at the line 7 percentage.
Line 8: Net Schedule C profit before the home office deduction. This is the cap — your home office deduction can't push your Schedule C below zero. (Excess carries forward; see Part IV.)
Lines 9–13 — operating expenses (the IRS allows these regardless of profit-cap):
- Casualty losses (line 9)
- Deductible mortgage interest (line 10)
- Real estate taxes (line 11)
Lines 14–22 — operating expenses subject to the profit cap:
- Insurance (line 17)
- Rent (line 18) — for renters; line 10/11 for owners
- Repairs and maintenance (line 19)
- Utilities (line 20)
- Other expenses (line 21)
For each, enter the direct expense in column (a) and the indirect expense in column (b). The form multiplies indirect by your business-use percentage automatically.
Line 27: Casualty loss / depreciation allowed (from Part III). Subject to profit cap.
Line 34: Allowable expenses for business use of home. This is what flows to Schedule C, line 30.
Part III — Depreciation of your home (owners only)
For owners using the actual method, you depreciate the business portion of the home over 39 years (commercial straight-line). For the documentation discipline that supports any of these expense numbers, see receipt requirements: what the IRS actually wants.
Line 36: Smaller of (a) home's adjusted basis or (b) home's fair market value when first used for business. Land doesn't depreciate — separate it out.
Line 37: Land value. (Subtract from line 36 to get depreciable basis.)
Line 38: Basis of building (line 36 − line 37).
Line 39: Business basis = line 38 × line 7%.
Line 40: Depreciation percentage from the IRS table (typically 2.564% in year 1 if first used January–December, with mid-month convention adjustments).
Line 41: Depreciation = line 39 × line 40%. Carries to line 30 in Part II.
Part IV — Carryover of unallowed expenses
If your home office deduction exceeded your Schedule C profit (line 8), the excess carries to next year and can be deducted in a year with sufficient profit.
This is a friend in lean years and a friend in fat years. Lean year: you don't lose the deduction; it waits. Fat year: you stack carryovers against profit.
The depreciation recapture trap (revisited)
Every dollar of depreciation taken on line 41 reduces your home's basis. When you sell, you owe §1250 unrecaptured gain at up to 25% on that depreciation, even if the sale gain otherwise qualifies for the §121 home-sale exclusion ($250K single / $500K MFJ).
Math example: 5 years of $1,400/yr depreciation = $7,000 of recapture at sale, taxed at up to 25% = $1,750 in tax. If your annual home office benefit was $400 ($1,400 deduction × 28% combined rate), you'd net $2,000 over 5 years, then pay back $1,750 — net $250.
The recapture trap is why some sole props deliberately use the simplified method. The simplified method has no recapture. If you'll sell within 10 years and your actual-method advantage is small, simplified often wins after-tax.
Common errors
- Wrong basis — using the cost of the home today, not the adjusted basis on the date first used for business. The IRS uses the lower of cost-basis or FMV.
- Forgetting land allocation — land is non-depreciable. If the property was purchased for $400K with $80K land, only $320K is depreciable.
- Skipping insurance — homeowner's insurance × business-use percentage is deductible. Most people forget.
- Mixing simplified-year amounts into actual-year carryovers — simplified-method years generate no carryover. You can't bridge them.
- Wrong mid-month convention — the IRS uses mid-month for residential. Year 1 depreciation is partial based on the month first placed in service.
What if I have multiple home offices?
Use multiple Form 8829s, one per office. Each gets its own business-use percentage. Combined deduction can't exceed total Schedule C profit.
What if I had a home office part of the year?
Pro-rate based on months of use. If you started using the office July 1, line 41 (depreciation) is based on 6 months of mid-month convention. Operating expenses (utilities, etc.) are pro-rated by the user.
How ExpenseGhost helps
ExpenseGhost stores your home office square footage and total square footage at setup, then aggregates utility / mortgage / insurance transactions and applies the business-use percentage on the year-end Form 8829 worksheet. The output drops into TurboTax or a CPA package directly. See pricing.
FAQ
Do I have to file Form 8829 every year?
Yes — every year you take the actual-method deduction. Switching to simplified means no 8829 that year, and back to 8829 the year you switch back to actual.
What if I move mid-year?
Two Form 8829s — one for the old home, one for the new. Each computed independently. Carryovers from the old home roll forward.
Can I depreciate furniture in my home office?
Yes — but it's §179 / depreciation on Schedule C (line 13), not Form 8829. Form 8829 is only for the home itself.
What if I rent rather than own?
Form 8829 still applies. Use rent in place of mortgage interest + property tax + depreciation. Renters skip Part III entirely.
ExpenseGhost provides tax estimates and tax-ready exports. We are not a tax preparer and do not file returns. Estimates are informational — verify every number with a licensed tax professional before filing.