IRS Form 8829 is used to claim the allowable expenses that you can deduct for business use of your home on your federal tax return. From Form 8829, you calculate the deduction amount to be inserted on Schedule C (Form 1040). To deduct expenses related to the part of your home used for business, you must meet the following tests:

1. Your use of the business part of your home must be either:

Exclusive: You must use a specific area of your home only for your trade or business, and the area cannot be used for any other purpose. The area can be a room or other separately identifiable space. The space does not need to be marked off by a permanent partition.

Regular: You must use a specific area of your home for business on a continuing basis, not just occasional or incidental use; or

2. The business part of your home or a separate structure (not attached to your home) must be your principal place of business where you meet or deal with patients, clients, or customers in the normal course of your business. You must conduct the administrative or management activities of your business in your home exclusively and regularly, and you have no other fixed location where you conduct those activities Deductions

You generally cannot deduct expenses that are allocable to tax-exempt income. To calculate deductions, you can use square feet or any other reasonable method to measure the area for the part of your home used for your business. Direct or indirect expenses for the business use of your home can be 100% deductions.

You can deduct the depreciation of the part of your home you use for business by using the cost or the fair market value of your home on the date you first used the home for business. You will need to attach a schedule showing the cost of additions and improvements placed in service after you began to use your home for business. Then you refer to the IRS chart in the instructions booklet for the use of Form 8829 to find the percentage to use to calculate the depreciation deduction.

If your expenses are greater than the current year's limit, you can carry over the excess to the next tax year. For more information on deducting expenses for the business use of the home expenses, see IRS Pub. 587.