IRS Form 8829: A Line-by-Line Guide (2024-2026)
The first time my cousin saw Form 8829, he called me in a panic. "David, this form has three parts and dozens of lines. Where do I even start?" I knew exactly how he felt—the form looks intimidating, but once you understand each section, it's actually pretty straightforward.
In this guide, I'll walk through every line of Form 8829 using real numbers from my cousin's situation. By the end, you'll know exactly what goes where.
Meet "Sarah" – Our Example Taxpayer
To make this concrete, I'll use my cousin's friend Sarah as an example throughout. She's a freelance graphic designer in Austin, Texas.
Sarah's Situation
- Home: 1,800 sq ft apartment (she rents)
- Office: 225 sq ft spare bedroom, used exclusively for business
- Business percentage: 225 ÷ 1,800 = 12.5%
- Annual rent: $26,400 ($2,200/month)
- Utilities: $3,360/year ($280/month)
- Internet: $1,200/year (100% business, so direct expense)
- Office supplies: $500 (direct expense)
- Business income: $85,000
Part I: Figuring Your Business Percentage
This part determines what percentage of your home expenses you can deduct. It's the foundation for everything else.
Area used regularly and exclusively for business
Enter the square footage of your home office space. Be accurate—the IRS doesn't expect professional measurements, but use a tape measure and be reasonable.
Total area of your home
Enter the total square footage of your entire home. If you live in an apartment, use the apartment's total square footage.
Divide line 1 by line 2
This is your business percentage. Carry it to two decimal places.
Part II: Figuring Your Allowable Deduction
This is where you list your expenses and apply your business percentage. The form separates direct expenses (100% deductible) from indirect expenses (deductible at your business percentage).
Enter amount from line 3 (business percentage)
Copy your percentage from line 3.
Direct expenses
These are expenses that benefit ONLY the business part of your home. Examples: painting the office, repairing office-only windows, or (in Sarah's case) internet if used 100% for business.
Indirect expenses
Enter expenses that benefit your entire home. Don't total them yet—the form has specific lines for each type.
Lines 8-21 list specific expense categories. I'll cover the most common ones:
Rent
If you rent, enter your total rent for the year.
Mortgage interest
If you own, enter interest reported on Form 1098.
Utilities
Electricity, gas, water, trash.
Insurance
Renters or homeowners insurance.
Repairs
Repairs that benefit entire home.
Security system
Monitoring fees, equipment.
Total indirect expenses
Add lines 8 through 21.
Multiply line 22 by line 4
This applies your business percentage to indirect expenses.
Add lines 5 and 23
Direct expenses (line 5) + business portion of indirect (line 23).
Deduction limit
Your home office deduction cannot exceed your business income. Enter your net business income (from Schedule C line 29).
Since Sarah's deduction ($5,457.50) is less than her income, she can deduct the full amount. If it exceeded income, the excess carries to next year.
Allowable home office deduction
This is your final deduction amount. Enter the smaller of line 24 or line 29.
Part III: Depreciation (For Homeowners Only)
If you own your home, you can also deduct depreciation. This gets more complex, so I'll summarize:
Key Depreciation Lines
- Line 31: Enter your home's adjusted basis (cost plus improvements, minus land value)
- Line 32: Value of land (not depreciable)
- Line 33: Subtract land from basis = depreciable basis
- Line 34: Business percentage from line 3
- Line 35: Depreciation percentage from IRS tables (usually 2.564% for first year, 2.564% for subsequent years)
- Line 38: Multiply line 33 × line 34 × line 35 = depreciation deduction
Where the Deduction Goes
After completing Form 8829, you carry the final amount to:
- Schedule C (Profit or Loss from Business), line 30
If you use the simplified method, you skip Form 8829 entirely and enter directly on Schedule C line 30.