Brooke owns a sole proprietorship in which she works as a management consultant. She maintains an office in her home where she meets with clients, prepares bills, and performs other work-related tasks. The home office is 300 square feet, and the entire house is 4,500 square feet. Brooke incurred the following home-related expenses during the year. Brooke itemizes her deductions and her itemized deduction for nonhome business taxes is less than $10,000 by more than the real property taxes allocated to business use of the home. Unless indicated otherwise, assume Brooke uses the actual expense method to compute home office expenses.
| Real property taxes | $ 3,600 |
| Interest on home mortgage | 14,000 |
| Operating expenses of home | 5,000 |
| Depreciation | 12,000 |
| Repairs to home theater room | 1,000 |
| |
Assuming Brooke reported $2,000 of Schedule C income before the home office expense deduction, complete Form 8829 for Brookes home office expense deduction. Also assume the value of the home is $500,000 and the adjusted basis of the home (exclusive of land) is $468,019.
Form 8829:
OMB No. 1545 0074 Form 8829 Expenses for Business Use of Your Home File only with Schedule C (Form 1040). Use a separate Form 8829 for each home you used for business during the year. Go to www.irs.gov/Form8829 for instructions and the latest information. 2021 Department of the Treasury Internal Revenue Service (99) Name(s) of proprietor(s) Attachment Sequence No. 176 Your social security number 1 2 3 % 5 7 % 8 14 15 20 Partl Part of Your Home Used for Business 1 Area used regularly and exclusively for business, regularly for daycare, or for storage of inventory or product samples (see instructions) 2 Total area of home. 3 Divide line 1 by line 2. Enter the result as a percentage. For daycare facilities not used exclusively for business, go to line 4. All others, go to line 7. 4 Multiply days used for daycare during year by hours used per day.. 4 hr. 5 If you started or stopped using your home for daycare during the year, see instructions; otherwise, enter 8,760 hr. 6 Divide line 4 by line 5. Enter the result as a decimal amount 6 7 Business percentage. For daycare facilities not used exclusively for business, multiply line 6 by line 3 (enter the result as a percentage). All others, enter the amount from line 3 Part II Figure Your Allowable Deduction 8 Enter the amount from Schedule C, line 29, plus any gain derived from the business use of your home, minus any loss from the trade or business not derived from the business use of your home. See instructions. See instructions for columns (a) and (b) before completing lines 9-22. (a) Direct expenses (b) Indirect expenses 9 Casualty losses (see instructions). 9 10 Deductible mortgage interest (see instructions) 10 11 Real estate taxes (see instructions) 11 12 Add lines 9, 10, and 11 12 13 Multiply line 12, column (b), by line 7 13 14 Add line 12, column (a), and line 13 15 Subtract line 14 from line 8. If zero or less, enter-O- 16 Excess mortgage interest (see instructions) 16 17 Excess real estate taxes (see instructions) 17 18 Insurance 18 19 Rent 19 20 Repairs and maintenance 21 Utilities 21 22 Other expenses (see instructions) 22 23 Add lines 16 through 22 23 24 Multiply line 23, column (b), by line 7 24 25 Carryover of prior year operating expenses (see instructions) 25 26 Add line 23, column (a), line 24, and line 25. 27 Allowable operating expenses. Enter the smaller of line 15 or line 26 28 Limit on excess casualty losses and depreciation. Subtract line 27 from line 15 29 Excess casualty losses (see instructions) 29 30 Depreciation of your home from line 42 below 30 31 Carryover of prior year excess casualty losses and depreciation (see instructions) 31 32 Add lines 29 through 31 33 Allowable excess casualty losses and depreciation. Enter the smaller of line 28 or line 32 34 Add lines 14, 27, and 33 35 Casualty loss portion, if any, from lines 14 and 33. Carry amount to Form 4684. See instructions 36 Allowable expenses for business use of your home. Subtract line 35 from line 34. Enter here and on Schedule C, line 30. If your home was used for more than one business, see instructions. Part III Depreciation of Your Home 37 Enter the smaller of your home's adjusted basis or its fair market value. See instructions 38 Value of land included on line 37 39 Basis of building. Subtract line 38 from line 37 40 Business basis of building. Multiply line 39 by line 7 41 Depreciation percentage (see instructions) . . 42 Depreciation allowable (see instructions). Multiply line 40 by line 41. Enter here and on line 30 above Part IV Carryover of Unallowed Expenses to 2022 43 Operating expenses. Subtract line 27 from line 26. If less than zero, enter-O- 44 Excess casualty losses and depreciation. Subtract line 33 from line 32. If less than zero, enter-0- For Paperwork Reduction Act Notice, see your tax return instructions. Cat. No. 13232M 26 27 28 32 33 34 35 36 37 38 39 40 41 42 % 43 44 Form 8829 (2021)
