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You can deduct expenses for a separate free-standing structure, such as a studio, workshop, garage, or barn, if you use it exclusively and regularly for your business. The structure does not have to be your principal place of business or a place where you meet patients, clients, or customers.
Each portable home uses a patented lever system that enables different parts of the structure to move simultaneously as the building unfolds. Like...
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Shed Assembly Cost by Size Shed Size Cost 6x9 $1,200 – $2,320 8x5 $700 – $1,290 8x10 $870 – $2,500 8x12 $820 – $2,400 12 more rows • Apr 14, 2022
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Learn More »John Berry operates a floral shop in town. He grows the plants for his shop in a greenhouse behind his home. He uses the greenhouse exclusively and regularly in his business, so he can deduct the expenses for its use (subject to certain limitations, explained later). You can deduct expenses for a separate free-standing structure, such as a studio, workshop, garage, or barn, if you use it exclusively and regularly for your business. The structure does not have to be your principal place of business or a place where you meet patients, clients, or customers. June Quill, a self-employed attorney, works 3 days a week in her city office. She works 2 days a week in her home office used only for business. She regularly meets clients there. Her home office qualifies for a business deduction because she meets clients there in the normal course of her business. The part of your home you use exclusively and regularly to meet patients, clients, or customers does not have to be your principal place of business. Using your home for occasional meetings and telephone calls will not qualify you to deduct expenses for the business use of your home. Their use of your home is substantial and integral to the conduct of your business. If you meet or deal with patients, clients, or customers in your home in the normal course of your business, even though you also carry on business at another location, you can deduct your expenses for the part of your home used exclusively and regularly for business if you meet both the following tests. You can use your home office for more than one trade or business activity, but you cannot use it for any activities that are not related to a trade or business. If your home office is a separate structure, in connection with one or more of your trades or businesses. As a place to meet or deal with patients, clients, or customers in the normal course of one or more of your trades or businesses. As the principal place of business for one or more of your trades or businesses. The same home office can be the principal place of business for two or more separate business activities. Whether your home office is the principal place of business for more than one business activity must be determined separately for each of your trade or business activities. You must use the home office exclusively and regularly for one or more of the following purposes. Paul's home office qualifies as his principal place of business for deducting expenses for its use. He conducts administrative or management activities for his business as an anesthesiologist there and he has no other fixed location where he conducts substantial administrative or management activities for this business. His choice to use his home office instead of the one provided by the hospital does not disqualify his home office from being his principal place of business. His performance of substantial nonadministrative or nonmanagement activities at fixed locations outside his home also does not disqualify his home office from being his principal place of business. He meets all the qualifications, including principal place of business, so he can deduct expenses (subject to certain limitations, explained later) for the business use of his home. Paul very rarely uses the office the hospital provides. He uses a room in his home that he has converted to an office. He uses this room exclusively and regularly to conduct all the following activities. Paul is a self-employed anesthesiologist. He spends the majority of his time administering anesthesia and postoperative care in three local hospitals. One of the hospitals provides him with a small shared office where he could conduct administrative or management activities. Pamela's home office qualifies as her principal place of business for deducting expenses for its use. She conducts administrative or management activities there and she has no other fixed location where she conducts substantial administrative or management activities. The fact that she conducts some administrative or management activities in her hotel room (not a fixed location) does not disqualify her home office from being her principal place of business. She meets all the qualifications, including principal place of business, so she can deduct expenses (subject to certain limitations, explained later) for the business use of her home. Pamela's business is selling products to customers at various locations throughout her territory. To make these sales, she regularly visits customers to explain the available products and take orders. Pamela is a self-employed sales representative for several different product lines. She has an office in her home that she uses exclusively and regularly to set up appointments and write up orders and other reports for the companies whose products she sells. She occasionally writes up orders and sets up appointments from her hotel room when she is away on business overnight. John's home office qualifies as his principal place of business for deducting expenses for its use. He uses the home office for the administrative or managerial activities of his plumbing business and he has no other fixed location where he conducts these administrative or managerial activities. His choice to have his billing done by another company does not disqualify his home office from being his principal place of business. He meets all the qualifications, including principal place of business, so he can deduct expenses (subject to certain limitations, explained later) for the business use of his home. John writes up estimates and records of work completed at his customers' premises. He does not conduct any substantial administrative or management activities at any fixed location other than his home office. John does not do his own billing. He uses a local bookkeeping service to bill his customers. John is a self-employed plumber. Most of John's time is spent at customers' homes and offices installing and repairing plumbing. He has a small office in his home that he uses exclusively and regularly for the administrative or management activities of his business, such as phoning customers, ordering supplies, and keeping his books. Footnote: Do not use this chart if you use your home for the storage of inventory or product samples, or to operate a daycare facility. See Exceptions to Exclusive Use, earlier, and Day-Care Facility, later. You have suitable space to conduct administrative or management activities outside your home, but choose to use your home office for those activities instead. You conduct substantial nonadministrative or nonmanagement business activities at a fixed location outside your home. (For example, you meet with or provide services to customers, clients, or patients at a fixed location of the business outside your home.) You conduct administrative or management activities at places that are not fixed locations of your business, such as in a car or a hotel room. You have others conduct your administrative or management activities at locations other than your home. (For example, another company does your billing from its place of business.) The following activities performed by you or others will not disqualify your home office from being your principal place of business. There are many activities that are administrative or managerial in nature. The following are a few examples. If, after considering your business locations, your home cannot be identified as your principal place of business, you cannot deduct home office expenses. However, see the later discussions under Place To Meet Patients, Clients, or Customers and Separate Structure for other ways to qualify to deduct home office expenses. You have no other fixed location where you conduct substantial administrative or management activities of your trade or business. You can have more than one business location, including your home, for a single trade or business. To qualify to deduct the expenses for the business use of your home under the principal place of business test, your home must be your principal place of business for that trade or business. To determine whether your home is your principal place of business, you must consider: You use part of your home exclusively and regularly to read financial periodicals and reports, clip bond coupons, and carry out similar activities related to your own investments. You do not make investments as a broker or dealer. So, your activities are not part of a trade or business and you cannot take a deduction for the business use of your home. To qualify under the trade-or-business-use test, you must use part of your home in connection with a trade or business. If you use your home for a profit-seeking activity that is not a trade or business, you cannot take a deduction for its business use. To qualify under the regular use test, you must use a specific area of your home for business on a regular basis. Incidental or occasional business use is not regular use. You must consider all facts and circumstances in determining whether your use is on a regular basis. Your home is the only fixed location of your business of selling mechanics' tools at retail. You regularly use half of your basement for storage of inventory and product samples. You sometimes use the area for personal purposes. The expenses for the storage space are deductible even though you do not use this part of your basement exclusively for business. You keep the inventory or product samples in your home for use in your trade or business. If you use part of your home for storage of inventory or product samples, you can deduct expenses for the business use of your home without meeting the exclusive use test. However, you must meet all the following tests. With the exception of these two uses, any portion of the home used for business purposes must meet the exclusive use test. You use the part of your home in question for the storage of inventory or product samples (discussed next). You do not have to meet the exclusive use test if either of the following applies. You are an attorney and use a den in your home to write legal briefs and prepare clients' tax returns. Your family also uses the den for recreation. The den is not used exclusively in your trade or business, so you cannot claim a deduction for the business use of the den. You do not meet the requirements of the exclusive use test if you use the area in question both for business and for personal purposes. To qualify under the exclusive use test, you must use a specific area of your home only for your trade or business. The area used for business can be a room or other separately identifiable space. The space does not need to be marked off by a permanent partition. In the case of a separate structure which is not attached to your home, in connection with your trade or business; Exclusively and regularly as a place where you meet or deal with patients, clients, or customers in the normal course of your trade or business; To qualify to deduct expenses for business use of your home, you must use part of your home: Generally, you cannot deduct items related to your home, such as mortgage interest, real estate taxes, utilities, maintenance, rent, depreciation, or property insurance, as business expenses. However, you may be able to deduct expenses related to the business use of part of your home if you meet specific requirements. Even then, the deductible amount of these types of expenses may be limited. Use this section and Figure A to decide if you can deduct expenses for the business use of your home. . If you used at least 300 square feet for daycare regularly and exclusively during the year, then you do not need to reduce the prescribed rate or complete the Daycare Facility Worksheet.. If you do not use the area of your home exclusively for daycare, you must reduce the prescribed rate (maximum $5 per square foot) before figuring your deduction. The reduced rate will equal the prescribed rate times a fraction. The numerator of the fraction is the number of hours that the space was used during the year for daycare and the denominator is the total number of hours during the year that the space was available for all uses. You can use the Daycare Facility Worksheet (for simplified method) , near the end of this publication, to help you figure the reduced rate. These expenses relate to the business activity in the home, but not to the use of the home itself. You can still deduct business expenses that are unrelated to the use of the home. See Where To Deduct , later. Examples of business expenses that are unrelated to the use of the home are advertising, wages, supplies, dues, and depreciation for equipment. Your deduction for business use of the home is limited to an amount equal to the gross income derived from the qualified business use of the home reduced by the business deductions that are unrelated to the use of your home. If the business deductions that are unrelated to the use of your home are greater than the gross income derived from the qualified business use of your home, then you cannot take a deduction for this qualified business use of your home. Donna files her federal income tax return on a calendar year basis. From January 1 through July 16 she used 300 square feet of her home for a qualified business use. On July 17, Donna moved to a new home and immediately began using 200 square feet for the same qualified business use. While preparing her tax return, Donna decided to use the simplified method to deduct her qualified business use of the first home and files a Form 8829 to deduct her qualified business use of the second home. Her average monthly allowable square footage is 175 square feet, which is figured using 300 square feet for January through July divided by the number of months in the year ((300 + 300 + 300 + 300 + 300 + 300 + 300 + 0 + 0 + 0 + 0 + 0)/12). Amy files her federal income tax return on a calendar year basis. On April 20, she began using 100 square feet of her home for a qualified business use. On August 5, she expanded the area of her qualified use to 330 square feet. Amy continued to use the 330 square feet until the end of the year. Her average monthly allowable square footage is 150 square feet, which is figured using 100 square feet for May through July and 300 square feet for August through December divided by the number of months in the year ((0 + 0 + 0 + 0 + 100 + 100 +100 + 300 + 300 + 300 + 300 + 300)/12). Andy files his federal income tax return on a calendar year basis. On July 20, he began using 420 square feet of his home for a qualified business use. He continued to use the 420 square feet until the end of the year. His average monthly allowable square footage is 125 square feet, which is figured using 300 square feet for each month, August through December, divided by the number of months in the year ((0 + 0 + 0 + 0 + 0 + 0 + 0 + 300 + 300 + 300 + 300 + 300)/12). If your qualified business use was for a portion of the year (for example, a seasonal business, a business that begins during the year, or you moved during the year) or you changed the square footage of your qualified business use, your deduction is limited to the average monthly allowable square footage. You calculate the average monthly allowable square footage by adding the amount of allowable square feet you used in each month and dividing the sum by 12. When determining the average monthly allowable square footage, you cannot take more than 300 square feet into account for any 1 month. Additionally, if your qualified business use was less than 15 days in a month, you must use -0- for that month. The simplified method does not apply to rental use. A rental use that qualifies for the deduction must be figured using actual expenses. If the rental use and a qualified business use share the same area, you will have to allocate the actual area used between the two uses. You cannot use the same area to figure a deduction for the qualified business use as you are using to figure the deduction for the rental use. If you conduct more than one business qualifying for the deduction, you are limited to a maximum of 300 square feet for all of the businesses. Allocate the actual square footage used (up to the maximum of 300 square feet) among your qualified business uses in a reasonable manner. However, do not allocate more square feet to a qualified business use than you actually use for that business. Kristen and Lindsey are roommates. Kristen uses 300 square feet of their home for a qualified business use. Lindsey uses 200 square feet of their home for a separate qualified business use. The qualified business uses share 100 square feet. In addition to the portion that they do not share, Kristen and Lindsey can both claim 50 of the 100 square feet or divide the 100 square feet between them in any reasonable manner. If divided evenly, Kristen could claim 250 square feet using the simplified method and Lindsey could claim 150 square feet. If you share your home with someone else who uses the home to conduct business that also qualifies for this deduction, you may not include the same square feet to figure your deduction as the other person. You must allocate the shared space between you and the other person in a reasonable manner.
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If the qualified business use of the home is also a qualified joint venture, you and your spouse will figure the deduction for the business use separately. Split the actual area used in conducting business between you and your spouse in the same manner you split your other tax attributes. Then, each spouse will figure the allowable area separately. For more information about qualified joint ventures, see Qualified Joint Venture in the Instructions for Schedule C. In most cases, the allowable area is the smaller of the actual area (in square feet) of your home used in conducting the business and 300 square feet. Your allowable area may be smaller if you conducted the business as a qualified joint venture with your spouse, the area used by the business was shared with another qualified business use, you used the home for the business for only part of the year, or the area used by the business changed during the year. You can use the Area Adjustment Worksheet (for simplified method) , near the end of this publication, to help you figure your allowable area for a qualified business use. If you are a partner or you use your home in your farming business and file Schedule F (Form 1040), you can use the Simplified Method Worksheet , near the end of this publication, to help you figure your deduction. If you use your home in a trade or business and you file Schedule C (Form 1040), you will use the Simplified Method Worksheet in your Instructions for Schedule C to figure your deduction. Take the smaller of the amounts from (1) and (2). This is the amount you can deduct for this qualified business use of your home using the simplified method. Subtract the expenses from the business that are not related to the use of the home from the gross income related to the business use of the home. If these expenses are greater than the gross income from the business use of the home, then you cannot take a deduction for this business use of the home. See Gross income limitation , later. Multiply the allowable area by $5 (or less than $5 if the qualified business use is for a daycare that uses space in your home on a regular, but not exclusive, basis). See Allowable area and Space used regularly for daycare , later. To figure the amount you can deduct for qualified business use of your home using the simplified method, follow these three steps. If the qualified business use is for a daycare facility that uses space in your home on a regular (but not exclusive) basis, you will need to know the percentage of time that part of your home is used for daycare. The amount of the business expenses that are not related to the use of your home. The allowable area of your home used in conducting the business. If you did not conduct the business for the entire year in the home or the area changed during the year, you will need to know the allowable area you used and the number of days you conducted the business for each month. Your deduction for the qualified business use of a home is the sum of each amount you figure for a separate qualified business use of your home. To figure your deduction for the business use of a home using the simplified method, you will need to know the following information for each qualified business use of the home. If you used more than one home in your business during the year (for example, you moved during the year), you can elect to use the simplified method for only one of the homes. You must figure the deduction for any other home using actual expenses. If you conduct more than one business that qualifies for this deduction in your home, your election to use the simplified method applies to all your qualified business uses of that home. If you share your home with someone else who also uses the home in a business that qualifies for this deduction, each of you makes your own election. You choose whether or not to figure your deduction using the simplified method each tax year. Make the election for a home by using the simplified method to figure the deduction for the qualified business use of that home on a timely filed, original federal income tax return. An election for a tax year, once made, is irrevocable. A change from using the simplified method in one year to actual expenses in a succeeding tax year, or vice versa, is not a change in method of accounting and does not require the consent of the Commissioner. If you used actual expenses to figure your deduction for business use of the home in a prior year and your deduction was limited, you cannot deduct the disallowed amount carried over from the prior year during a year you figure your deduction using the simplified method. Instead, you will continue to carry over the disallowed amount to the next year that you use actual expenses to figure your deduction. When using the simplified method, treat as personal expenses your mortgage interest, real estate taxes, and casualty losses. If you also rent part of your home, you must still allocate these expenses between rental use and personal use (for this purpose, personal use includes business use reported using the simplified method). . Although you cannot deduct any depreciation or section 179 expense for the portion of your home used for a qualified business use, you may still claim depreciation or the section 179 expense deduction on other assets used in the business (for example, furniture and equipment).. For more information about claiming depreciation in a subsequent year, see Revenue Procedure 2013-13, 2013-06 I.R.B. 478, available at IRS.gov/irb/2013-06_IRB#RP-2013-13 . See Pub. 946 for the optional depreciation tables. If you elect to use the simplified method, you cannot deduct any actual expenses for the business except for business expenses that are not related to the use of the home. You also cannot deduct any depreciation (including any additional first-year depreciation) or section 179 expense for the portion of the home that is used for a qualified business use. The depreciation deduction allowable for that portion of the home is deemed to be zero for a year you use the simplified method. If you figure your deduction for business use of the home using actual expenses in a subsequent year, you will have to use the appropriate optional depreciation table for MACRS to figure your depreciation. The simplified method is an alternative to the calculation, allocation, and substantiation of actual expenses. In most cases, you will figure your deduction by multiplying $5, the prescribed rate, by the area of your home used for a qualified business use. The area you use to figure your deduction is limited to 300 square feet. See Simplified Amount , later, for information about figuring the amount of the deduction. . If your home office qualifies as your principal place of business, you can deduct your daily transportation costs between your home and another work location in the same trade or business. For more information on transportation costs, see Pub. 463, Travel, Gift, and Car Expenses.. If part of the gross income from your trade or business is from the business use of part of your home and part is from a place other than your home, you must determine the part of your gross income from the business use of your home before you figure the deduction limit. In making this determination, consider the time you spend at each location, the business investment in each location, and any other relevant facts and circumstances. You can deduct all of the business part of your deductible mortgage interest and real estate taxes ($3,000). You can also deduct all of your business expenses not related to the use of your home ($2,000). Additionally, you can deduct all of the business part of your expenses for maintenance, insurance, and utilities, because the total ($800) is less than the $1,000 deduction limit. Your deduction for depreciation for the business use of your home is limited to $200 ($1,000 minus $800) because of the deduction limit. You can carry over the $1,400 balance and add it to your depreciation for 2022, subject to your deduction limit in 2022. You meet the requirements for deducting expenses for the business use of your home. You use 20% of your home for business. You are itemizing your deductions on Schedule A (Form 1040) and your home mortgage interest and total state and local taxes would not be limited on your Schedule A if you had not used your home for business. In 2021, your business expenses and the expenses for the business use of your home are deducted from your gross income in the following order. If you are a partner or you file Schedule F (Form 1040), use the Worksheet To Figure the Deduction for Business Use of Your Home , near the end of this publication. If you file Schedule C (Form 1040), figure your deduction limit and carryover on Form 8829. If your business expenses related to the home are greater than the current year's limit, you can carry over the excess to the next year in which you use actual expenses. They are subject to the deduction limit for that year, whether or not you live in the same home during that year. If you are self-employed, do not include in (2) above your deduction for one-half of your self-employment tax. The business expenses that relate to the business activity in the home (for example, business phone, supplies, and depreciation on equipment), but not to the use of the home itself. The business part of expenses you could deduct even if you did not use your home for business (such as mortgage interest, mortgage insurance premiums, real estate taxes, and casualty losses attributable to a federally declared disaster if you itemize deductions on Schedule A (Form 1040) or net qualified disaster losses if you claim the standard deduction). Your deduction of otherwise nondeductible expenses, such as insurance, utilities, and depreciation of your home (with depreciation of your home taken last), that are allocable to the business, is limited to the gross income from the business use of your home minus the sum of the following. If your gross income from the business use of your home is less than your total business expenses, your deduction for certain expenses for the business use of your home is limited. If your gross income from the business use of your home equals or exceeds your total business expenses (including depreciation), you can deduct all your business expenses related to the use of your home. . Use lines 1–7 of Form 8829, or lines 1–3 on the Worksheet To Figure the Deduction for Business Use of Your Home (near the end of this publication) to figure your business percentage. . If the rooms in your home are all about the same size, you can divide the number of rooms used for business by the total number of rooms in your home. You can use any reasonable method to determine the business percentage. The following are two commonly used methods for figuring the percentage. To find the business percentage, compare the size of the part of your home that you use for business to your whole house. Use the resulting percentage to figure the business part of the expenses for operating your entire home. Add the costs of permanent improvements made before you began using your home for business to the basis of your property. Depreciate these costs as part of the cost of your home, as explained earlier. The costs of improvements made after you begin using your home for business (that affect the business part of your home, such as a new roof) are depreciated separately. Multiply the cost of the improvement by the business-use percentage and depreciate the result over the recovery period that would apply to your home if you began using it for business at the same time as the improvement. For improvements made this year, the recovery period is 39 years. For the percentage to use for the first year, see Table 2 . For more information on recovery periods, see Pub. 946. George files his return based on the calendar year. May is the fifth month of his tax year. He multiplies his depreciable basis of $9,200 by 1.605% (0.01605), the percentage from the table for the fifth month. His depreciation deduction is $147.66. In May, George began to use one room in his home exclusively and regularly to meet clients. This room is 8% of the square footage of his home. He bought the home in 2008 for $125,000. He determined from his property tax records that his adjusted basis in the house (exclusive of land) is $115,000. In May, the house had a fair market value of $165,000. He multiplies his adjusted basis of $115,000 (which is less than the fair market value) by 8%. The result is $9,200, his depreciable basis for the business part of the house. Multiply the depreciable basis of the business part of your home by the percentage from the table for the first month you use your home for business. See Pub. 946 for the percentages for the remaining tax years of the recovery period. If 2021 was the first year you used your home for business, you can figure your 2021 depreciation for the business part of your home by using the appropriate percentage from the following table. The fair market value of your home (excluding land) on the date you began using your home for business. To figure the depreciation deduction, you must first figure the part of the cost of your home that can be depreciated (depreciable basis). The depreciable basis is figured by multiplying the percentage of your home used for business by the smaller of the following. If you began using your home for business for the first time in 2021, depreciate the business part as nonresidential real property under MACRS. Under MACRS, nonresidential real property is depreciated using the straight line method over 39 years. For more information on MACRS and other methods of depreciation, see Pub. 946. If you began using your home for business before 2021, continue to use the same depreciation method you used in past tax years. However, if you figured your deduction for business use of the home using the simplified method in a prior year, you will need to use the optional depreciation table for modified accelerated cost recovery system (MACRS) property. See Pub. 946 for the optional depreciation tables. For more information about the simplified method, see Revenue Procedure 2013-13, 2013-06 I.R.B. 478, available at IRS.gov/irb/2013-06_IRB#RP-2013-13 . The fair market value of your home is the price at which the property would change hands between a buyer and a seller, neither having to buy or sell, and both having reasonable knowledge of all necessary facts. Sales of similar property, on or about the date you begin using your home for business, may be helpful in determining the property's fair market value. If you deducted more depreciation than you should have, decrease your basis by the amount you should have deducted, plus the part of the excess depreciation you deducted that actually decreased your tax liability for any year. Decrease the basis of your property by the depreciation you deducted, or could have deducted, on your tax returns under the method of depreciation you properly selected. If you deducted less depreciation than you could have under the method you selected, decrease the basis by the amount you could have deducted under that method. If you did not deduct any depreciation, decrease the basis by the amount you could have deducted. You buy an older home and fix up two rooms as a beauty salon. You patch the plaster on the ceilings and walls, paint, repair the floor, install an outside door, and install new wiring, plumbing, and other equipment. Normally, the patching, painting, and floor work are repairs and the other expenses are permanent improvements. However, because the work gives your property a new use, the entire remodeling job is a permanent improvement and its cost is added to the basis of the property. You cannot deduct any portion of it as a repair expense. You must carefully distinguish between repairs and improvements. See Repairs , earlier, under Actual Expenses. You must also keep accurate records of these expenses. These records will help you decide whether an expense is a deductible or a capital (added to the basis) expense. However, if you make repairs as part of an extensive remodeling or restoration of your home, the entire job is an improvement. A permanent improvement increases the value of property, adds to its life, or gives it a new or different use. Examples of improvements are replacing electric wiring or plumbing, adding a new roof or addition, paneling, or remodeling.
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The adjusted basis of your home is generally its cost, plus the cost of any permanent improvements you made to it, minus any casualty losses or depreciation deducted in earlier tax years. For a discussion of adjusted basis, see Pub. 551, Basis of Assets. The cost of any improvements before and after you began using the property for business. The adjusted basis and fair market value of your home (excluding land) at the time you began using it for business. If you own your home and qualify to deduct expenses for its business use, you can claim a deduction for depreciation. Depreciation is an allowance for the wear and tear on the part of your home used for business. You cannot depreciate the cost or value of the land. You recover its cost when you sell or otherwise dispose of the property. The basic local telephone service charge, including taxes, for the first telephone landline into your home is a nondeductible personal expense. However, charges for business long-distance phone calls on that line, as well as the cost of a second line into your home used exclusively for business, are deductible business expenses. Do not include these expenses as a cost of using your home for business. Deduct these charges separately on the appropriate form or schedule. For example, if you file Schedule C (Form 1040), deduct these expenses on line 25, Utilities (instead of line 30, Expenses for business use of your home). Expenses for utilities and services, such as electricity, gas, trash removal, and cleaning services, are primarily personal expenses. However, if you use part of your home for business, you can deduct the business part of these expenses. Generally, the business percentage for utilities is the same as the percentage of your home used for business. If you install a security system that protects all the doors and windows in your home, you can deduct the business part of the expenses you incur to maintain and monitor the system. You can also take a depreciation deduction for the part of the cost of the security system relating to the business use of your home. Repairs keep your home in good working order over its useful life. Examples of common repairs are patching walls and floors, painting, wallpapering, repairing roofs and gutters, and mending leaks. However, repairs are sometimes treated as a permanent improvement and are not deductible. See Permanent improvements , later, under Depreciating Your Home. The cost of repairs that relate to your business, including labor (other than your own labor), is a deductible expense. For example, a furnace repair benefits the entire home. If you use 10% of your home for business, you can deduct 10% of the cost of the furnace repair. If you own your home, you cannot deduct the fair rental value of your home. However, see Depreciating Your Home , later. If you rent the home you occupy and meet the requirements for business use of the home, you can deduct part of the rent you pay. To figure your deduction, multiply your rent payments by the percentage of your home used for business. You can deduct the cost of insurance that covers the business part of your home. However, if your insurance premium gives you coverage for a period that extends past the end of your tax year, you can deduct only the business percentage of the part of the premium that gives you coverage for your tax year. You can deduct the business percentage of the part that applies to the following year in that year. Rent paid for the use of property you do not own but use in your trade or business. Other expenses are deductible only if you use your home for business. If the expense is indirect, use the business percentage of these expenses to figure how much to include in your total business-use-of-the-home deduction. These expenses generally include (but are not limited to) the following. See the Instructions for the Worksheet To Figure the Deduction for Business Use of Your Home , later in this publication, or the Instructions for Form 8829 for more information about figuring and deducting the business part of these otherwise allowable expenses. For more information about deducting real estate taxes, see Pub. 530, Tax Information for Homeowners. For more information about deducting home mortgage interest and mortgage insurance premiums, see Pub. 936, Home Mortgage Interest Deduction. For more information about deducting casualty losses, see Pub. 547, Casualties, Disasters, and Thefts. Certain expenses are deductible to the extent they would have been deductible as an itemized deduction on your Schedule A or, if claiming the standard deduction, would have increased your standard deduction had you not used your home for business. If the expense is indirect, use the business percentage of these expenses to figure how much to include in your total business-use-of-the-home deduction. If you are itemizing your deductions on Schedule A (Form 1040), these expenses include the following. Table 1 describes the types of expenses you may have and the extent to which they are deductible. You must divide the expenses of operating your home between personal and business use. The part of a home operating expense you can use to figure your deduction depends on both of the following. If your housing is provided free of charge and the value of the housing is tax exempt, you cannot deduct the rental value of any portion of the housing. Generally, you cannot deduct expenses that are related to tax-exempt allowances. However, if you receive a tax-exempt parsonage allowance or a tax-exempt military allowance, your expenses for mortgage interest, mortgage insurance premiums, and real estate taxes are deductible under the normal rules. No deduction is allowed for other expenses related to the tax-exempt allowance. You cannot deduct expenses for the business use of your home incurred during any part of the year you did not use your home for business purposes. For example, if you begin using part of your home for business on July 1, and you meet all the tests from that date until the end of the year, consider only your expenses for the last half of the year in figuring your allowable deduction. If you are a partner or you use your home in your farming business and you file Schedule F (Form 1040), you can use the Worksheet To Figure the Deduction for Business Use of Your Home , near the end of this publication, to help you figure your deduction. If you use your home in a trade or business and you file Schedule C (Form 1040), you will use Form 8829 to figure your deduction. If you do not or cannot elect to use the simplified method for a home, you will figure your deduction for that home using your actual expenses. You will also need to figure the percentage of your home used for business and the limit on the deduction. The simplified method is an alternative to the calculation, allocation, and substantiation of actual expenses. You choose whether or not to figure your deduction using the simplified method each tax year. See Using the Simplified Method , later. After you determine that you meet the tests under Qualifying for a Deduction , you can begin to figure how much you can deduct. When figuring the amount you can deduct for the business use of your home, you will use either your actual expenses or a simplified method.
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