Home Office Deductions: How Do I Claim My Deductions Using Form 8829?

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DYou have come to the right place if you want to know how to claim home office deductions with Form 8829.

Tax credits are often intended for the self-employed or independent contractors, rather than employees of businesses forced to work remotely due to the pandemic.

What is IRS Form 8829?

Self-employed people with certain home offices can claim a tax credit for using their home for business purposes by completing Form 8829.

The simplified method (Table C) and the actual expense method (Form 8829) determine the amount of the deduction.

You can get a share of total housing costs in addition to deducting direct home office expenses such as the cost of office furniture. You can follow the instructions on the form to determine the percentage of your home that can be claimed for commercial use.

The actual expense method, while requiring more labor and record keeping throughout the year, usually results in a larger deduction.

How do I qualify for Form 8829?

Feed Schedule C

Only taxpayers filing Form 1040, Schedule C are eligible to use Form 8829. Schedule C is filed by sole proprietors and most owners of single member limited liability companies (LLCs), who can then use Form 8829 to determine their home office deduction.

Using space for nothing else

According to the IRS, you must list a portion of your home that will be used “exclusively and frequently” for your business in order to be eligible for the home office tax deduction. The ideal location is a basement or spare room, properly separated from the rest of the house.

In the event of an IRS audit, you will need to demonstrate that your home office is not being used for non-commercial purposes. For example, if you’re still using your dining room for family meals, it won’t suddenly turn into an office space.

The main place for business

The main place where you perform managerial and administrative duties should be your home office. While you may work elsewhere, your home office should be your primary location.

If your home office is your exclusive place to do business, according to the IRS, you must:

  • Charge fees from customers, patients, or clients
  • Keeping records and books.
  • Order products
  • make appointments
  • Send instructions or generate reports

Let’s say you work as a freelance consultant and frequently visit clients at their workplaces. You have a dedicated space in your home where you can bill clients and do bookkeeping, even if you spend most of your time elsewhere.

Not using the simplified method

If you choose the simplified home office deduction method, which gives you a $5 deduction for every square foot of office space up to 300 square feet, you do not have to file Form 8829.

You will need to reduce the amount of the simplified deduction to account for the months of your home office operation if you started running your business from home during the year.

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