Form 8829 Instructions: Home Office Deduction Guide 2026

Hi, I'm Slava, CEO and co-founder of Jupid. When I transitioned to working from home full-time, I initially used the simplified home office method—$5 per square foot, max $1,500. It took me a year to realize that Form 8829 (the regular method) could have saved me nearly three times as much. For anyone with significant home expenses, Form 8829 is worth the extra effort.

Form 8829 (Expenses for Business Use of Your Home) is how you calculate your home office deduction using actual expenses. While more complex than the simplified method, it typically yields a larger deduction for those with higher housing costs.

Form 8829 vs. Simplified Method: Quick Comparison

Before diving into Form 8829, let's understand when to use each method:

Rule of thumb: If your home office is larger than 300 sq ft or your housing costs exceed $30,000/year, Form 8829 likely provides a bigger deduction.

For more on the simplified method and qualification requirements, see our Home Office Deduction Guide 2026.

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Executive Summary: Form 8829 Key Numbers 2026

Legal Basis: IRC §280A, IRS Publication 587 (Business Use of Your Home)

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Who Should Use Form 8829?

Form 8829 is for self-employed individuals who:

✅ Use part of their home regularly and exclusively for business ✅ Want to deduct actual home expenses (not simplified method) ✅ Have housing costs high enough to exceed $1,500 deduction

Eligibility Requirements

To claim any home office deduction (simplified or regular), you must meet these tests:

1. Exclusive Use Test The area must be used ONLY for business—no personal use allowed.

Exception: Inventory storage and daycare facilities have modified exclusive use rules.

2. Regular Use Test You must use the space regularly (consistently), not just occasionally.

3. Principal Place of Business Test (One of These)

• It's your primary place of business, OR
• You meet clients/customers there regularly, OR
• It's a separate structure used for business

Who Cannot File Form 8829

❌ W-2 employees (home office deduction eliminated for employees 2018-2025) ❌ Partners claiming actual expenses (use different form) ❌ Taxpayers using simplified method for same home ❌ Anyone not meeting exclusive/regular use tests

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Form 8829: Line-by-Line Instructions

Form 8829 has four parts:

• Part I: Calculate your business use percentage
• Part II: Calculate your allowable deduction
• Part III: Calculate depreciation
• Part IV: Handle carryovers

Part I: Part of Your Home Used for Business

This section determines what percentage of your home is used for business.

Line 1: Area Used Regularly and Exclusively for Business

Enter the square footage of your home office. This is only the space used exclusively for business.

Example: 250 sq ft home office

Measuring tips:

• Measure the actual floor space used
• Include closets and storage within the office
• Don't include hallways or shared spaces

Line 2: Total Area of Your Home

Enter the total square footage of your entire home.

Example: 1,500 sq ft apartment

Line 3: Divide Line 1 by Line 2

This is your business use percentage.

250 ÷ 1,500 = 16.67%

Lines 4-6: Daycare Facilities (Skip if Not Applicable)

These lines apply only if you operate a daycare facility in your home. They calculate a modified percentage based on hours of use.

Line 7: Business Percentage

For most taxpayers, this equals Line 3. For daycare facilities, it's calculated using Lines 4-6.

Business percentage: 16.67%

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Part II: Figure Your Allowable Deduction

This section calculates your actual deduction based on expenses.

Line 8: Gross Income from Business Use of Home

Enter your business gross income related to the home office. This comes from Schedule C, Line 29 (tentative profit before home office deduction).

Schedule C Line 29: $80,000

Important: Your home office deduction cannot exceed this amount. Any excess carries forward.

Direct vs. Indirect Expenses

Form 8829 distinguishes between two types of expenses:

Direct Expenses (Column a):

• Benefit ONLY the business area
• Examples: Painting the office, office-specific repairs
• Deductible at 100%

Indirect Expenses (Column b):

• Benefit the entire home
• Examples: Mortgage interest, utilities, insurance
• Deductible at your business percentage (Line 7)

Lines 9-11: Casualty Losses, Mortgage Interest, Real Estate Taxes

These are your "Tier 1" expenses—deductible whether or not you have a home office.

Line 9: Casualty Losses Enter business portion of casualty losses from federally declared disasters.

Line 10: Deductible Mortgage Interest

• If you itemize: Enter mortgage interest allocable to home office
• If you take standard deduction: Leave blank (claim on Line 16 instead)

Line 11: Real Estate Taxes

• If you itemize: Enter real estate taxes allocable to home office (subject to SALT cap)
• If you take standard deduction: Leave blank (claim on Line 17 instead)

Lines 16-17: Excess Mortgage Interest and Taxes

For standard deduction filers or amounts exceeding itemized deduction limits:

• Line 16: Mortgage interest not deductible on Schedule A
• Line 17: Real estate taxes exceeding SALT cap ($10,000 limit)

Line 18: Insurance

Enter homeowners or renters insurance for indirect expenses column.

Annual insurance: $1,500
Indirect (Column b): $1,500

Line 19: Rent

If you rent, enter your annual rent in the indirect column.

Annual rent: $24,000
Indirect (Column b): $24,000

Note: If you own your home, leave this blank.

Line 20: Repairs and Maintenance

Enter home repairs and maintenance costs.

Direct (Column a): Repairs only to office space Indirect (Column b): Repairs to general home (roof, HVAC, etc.)

Office painting: $300 (Direct)
HVAC repair: $500 (Indirect)

Line 21: Utilities

Enter utility costs in the indirect column (unless you have separate meters for your office).

Electric: $2,400
Gas: $1,200
Water: $600
Total utilities: $4,200 (Indirect)

Line 22: Other Expenses

Enter other home-related business expenses not listed above:

• Security system
• Pest control
• HOA fees
• Snow removal
• Lawn care (if part of home office property)

Lines 23-28: Calculating Allowable Deduction

Line 23: Add columns (a) and (b) from Lines 9-22 Line 24: Multiply Line 23 Column (b) by Line 7 (business percentage) Line 25: Add any carryover from prior year (from last year's Form 8829, Line 43) Line 26: Add Lines 23(a), 24, and 25 Line 27: Tentative deduction (smaller of Line 8 or Line 26)

Example calculation:

Direct expenses: $300
Indirect expenses: $31,200
Indirect × 16.67%: $5,201
Total operating expenses: $5,501
Gross income limitation: $80,000
Allowable operating deduction: $5,501 ✓

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Part III: Depreciation of Your Home

If you OWN your home, you can also depreciate the business portion.

Important: When you sell your home, you'll need to recapture this depreciation (pay tax on it), even if you later switch to the simplified method.

Line 37: Enter the Smaller of Your Home's Adjusted Basis or Fair Market Value

Use the value when you first started using the home for business.

Adjusted basis: Usually what you paid, plus improvements, minus any previous depreciation.

Fair market value: What the home was worth when you started using it for business.

Home purchase price: $350,000
FMV when started business use: $400,000
Use: $350,000 (lower of the two)

Line 38: Value of Land

Subtract the land value (you can't depreciate land).

Land value: $100,000

Line 39: Basis of Building

Line 37 minus Line 38.

$350,000 - $100,000 = $250,000

Line 40: Business Basis of Building

Line 39 times Line 7 (business percentage).

$250,000 × 16.67% = $41,675

Line 41: Depreciation Percentage

2026 rates based on month first used for business:

If you started using the home for business before 2026: Use 2.564%

Line 42: Depreciation Allowable

Line 40 times Line 41 percentage.

First used in 2020: $41,675 × 2.564% = $1,068

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Part IV: Carryover of Unallowed Expenses

If your home office deduction exceeds your business income, the excess carries forward to next year.

Line 43: Operating Expenses Carryover

Line 26 minus Line 27. If zero or negative, no carryover.

Line 44: Excess Casualty/Depreciation Carryover

Line 32 minus Line 33. If zero or negative, no carryover.

These carryovers appear on next year's Form 8829, Lines 25 and 31.

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Complete Example: Form 8829 Calculation

Scenario: Maya, a freelance consultant

Home details:

• Owns a condo (purchase price: $400,000, land: $80,000)
• Total area: 1,200 sq ft
• Home office: 200 sq ft
• First used for business: 2023

Annual expenses:

• Mortgage interest: $18,000
• Property taxes: $6,000 (subject to SALT cap)
• Insurance: $1,800
• Utilities: $3,600
• Repairs (general): $1,200
• Office painting: $400

Business income: $120,000

Calculation:

Business percentage: 200 ÷ 1,200 = 16.67%

Direct expenses: $400 (office painting)

Indirect expenses:

• Mortgage interest: $18,000
• Property taxes: $6,000
• Insurance: $1,800
• Utilities: $3,600
• General repairs: $1,200
• Total indirect: $30,600

Indirect × 16.67%: $5,101

Total operating deduction: $400 + $5,101 = $5,501

Depreciation:

• Building basis: $400,000 - $80,000 = $320,000
• Business basis: $320,000 × 16.67% = $53,344
• Rate (started 2023): 2.564%
• Depreciation: $53,344 × 2.564% = $1,368

Total Form 8829 deduction: $5,501 + $1,368 = $6,869

Compared to simplified method:

• 200 sq ft × $5 = $1,000
• Form 8829 saves Maya an additional $5,869 in deductions

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Common Mistakes to Avoid

Mistake #1: Including Non-Exclusive Use Space

Problem: Counting a room that's also used for personal purposes.

Impact: Entire deduction could be disallowed in audit.

Solution: Only claim space used 100% for business. Use room dividers or designate specific areas if needed.

Mistake #2: Forgetting Depreciation

Problem: Completing Part II but skipping Part III.

Impact: Missing significant additional deduction.

Solution: If you own your home, always calculate depreciation in Part III.

Mistake #3: Not Tracking Carryovers

Problem: Losing track of expenses that exceeded income limitation.

Impact: Wasted deductions that should carry forward.

Solution: Keep prior year Form 8829s and enter carryovers on Lines 25 and 31.

Mistake #4: Wrong Business Percentage

Problem: Guessing at square footage instead of measuring.

Impact: Over or under-claiming the deduction.

Solution: Measure carefully. Keep a floor plan with measurements in your records.

Mistake #5: Mixing Simplified and Regular Methods

Problem: Trying to use both methods for the same home in the same year.

Impact: IRS will reject the return.

Solution: Choose one method per home per year. You can switch methods in different years.

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When to Choose Form 8829 Over Simplified Method

Use Form 8829 when:

✅ Your home office exceeds 300 sq ft ✅ Your total housing costs exceed $30,000/year ✅ You own your home (to claim depreciation) ✅ You have excess expenses to carry forward ✅ Your calculated deduction exceeds $1,500

Stick with simplified method when:

✅ Small office (under 300 sq ft) ✅ Lower housing costs ✅ You want minimal record-keeping ✅ You plan to sell your home soon (avoid depreciation recapture)

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Track Your Home Office Deduction With AI

Form 8829 requires tracking numerous expenses throughout the year: mortgage payments, utilities, insurance, repairs, and more. Missing even one category means leaving money on the table.

What makes Jupid different:

✅ Automatic expense categorization — We identify home-related expenses and sort them correctly

✅ Business percentage calculator — Enter your measurements once, and we apply the percentage to all eligible expenses

✅ Direct vs. indirect sorting — We know which expenses are direct (office-only) vs. indirect (whole home)

✅ Depreciation tracking — We calculate your annual depreciation and track cumulative totals for eventual recapture

✅ Chat with your AI accountant — Ask questions like "What's my home office deduction so far?" and get instant answers

Example conversation:

• You: "Should I use the simplified method or Form 8829?"
• Jupid: "Based on your 280 sq ft office and $42,000 in annual housing costs, Form 8829 would give you a deduction of approximately $4,900. The simplified method would only give you $1,400. I recommend Form 8829—it saves you $3,500 more."

Stop guessing at your home office deduction. Let Jupid track every expense and maximize your savings.

Try Jupid →

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Action Checklist: Form 8829

At the Start of the Year

• Measure your home office (exact square footage)
• Measure total home square footage
• Calculate business use percentage
• Create system for tracking home expenses

Throughout the Year

• Save receipts for all home-related expenses
• Track mortgage interest statements
• Document property tax payments
• Keep utility bills or totals
• Record any repairs (note if office-specific)

At Tax Time

• Complete Part I (business percentage)
• Calculate Part II (operating expenses)
• Calculate Part III (depreciation, if homeowner)
• Enter any carryovers from prior year
• Compare to simplified method—use higher
• Transfer deduction to Schedule C, Line 30

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Resources and Citations

IRS Forms and Instructions

• Form 8829 — Expenses for Business Use of Your Home
• Form 8829 Instructions — Line-by-line guidance
• Schedule C (Form 1040) — Profit or Loss From Business

IRS Publications

• Publication 587 — Business Use of Your Home
• Publication 946 — How To Depreciate Property

Tax Code References

• IRC §280A — Disallowance of certain expenses in connection with business use of home
• 26 CFR §1.280A-2 — Treasury Regulations on home office deductions

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Final Thoughts

Form 8829 takes more effort than the simplified method, but for many home-based business owners, the additional deduction is worth it. The key principles:

1. Measure accurately — Your business percentage drives everything
2. Track all expenses — Mortgage, utilities, insurance, repairs, taxes
3. Don't forget depreciation — It's often hundreds or thousands more
4. Save carryovers — Unused amounts benefit future years
5. Compare methods — Calculate both and choose the higher deduction

The time you spend completing Form 8829 could save you thousands in taxes each year.

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Disclaimer

This article provides general information about tax deductions and should not be considered tax advice. Tax laws change frequently, and individual circumstances vary significantly. For advice specific to your situation, consult with a qualified tax professional.

Tax Year: 2026 Last Updated: January 30, 2026