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Irs Freefile

2009 1040H&r Block Ez FormCan You Efile A 1040x2011 Tax Amendment FormAmending Tax ReturnsFiling A 1040x Amended Tax Return1040x Amended Tax FormAmendment Taxes1040ez Tax Form InstructionsIncome Tax Return Form 20121040ez Instructions 20132010 Tax Return Form1040 Ez 20121040My Free TaxCalif State Taxes WebsiteHow Do I Amend My 2009 Tax ReturnEfile Tax Extension Free1040ez Irs GovFiling Tax Return OnlineFree Federal State Tax FilingEz 1040Help With 1040x First TimeFile 2009 Taxes Online For FreeIrs Free Tax Return2011 Tax PrepIrs 1040ExtensionMypay GovFile An Amended Return Online1040x OnlineTaxes 1040ezIrs Tax Form 1040xH & R Block Free File 2012File Tax Return For 20122012 Tax Forms 1040Free State Income Tax PreparationTax 1040x2012 Form 1040ezIrs 1040ez Form

Irs Freefile

Irs freefile Publication 561 - Additional Material Table of Contents Tax Publications for Individual Taxpayers and Commonly Used Tax Forms Tax Publications for Individual Taxpayers and Commonly Used Tax Forms. Irs freefile  Summary: This is a listing of tax publications and commonly used tax forms. Irs freefile The text states:Tax Publications for Individual Taxpayers. Irs freefile  See How to Get Tax Help for a variety of ways to get publications, including by computer, phone, and mail. Irs freefile General Guides. Irs freefile   1--Your Rights as a Taxpayer 17--Your Federal Income Tax (For Individuals) 334--Tax Guide for Small Business (For Individuals Who Use Schedule C or C-EZ) 509--Tax Calendars for 2007 553--Highlights of 2006 Tax Changes 910--IRS Guide to Free Tax Services Specialized Publications. Irs freefile   3--Armed Forces' Tax Guide 54--Tax Guide for U. Irs freefile S. Irs freefile Citizens and Residents Aliens Abroad 225--Farmer's Tax Guide 463--Travel, Entertainment, Gift, and Car Expenses 501--Exemptions, Standard Deduction, and Filing Information 502--Medical and Dental Expenses 503--Child and Dependent Care Expenses 504--Divorced or Separated Individuals 505--Tax Withholding and Estimated Tax 514--Foreign Tax Credit for Individuals 516--U. Irs freefile S. Irs freefile Government Civilian Employees Stationed Abroad 517--Social Security and Other Information for Members of the Clergy and Religious Workers 519--U. Irs freefile S. Irs freefile Tax Guide for Aliens 520--Scholarships and Fellowships 521--Moving Expenses 523--Selling Your Home 524--Credit for the Elderly or the Disabled 525--Taxable and Nontaxable Income 526--Charitable Contributions 527--Residential Rental Property 529--Miscellaneous Deductions 530--Tax Information for First-Time Homeowners 531--Reporting Tip Income 536--Net Operating Losses (NOLs) for Individuals, Estates, and Trusts 537--Installment Sales 541--Partnerships 544--Sales and Other Dispositions of Assets 547--Casualties, Disasters, and Thefts 550--Investment Income and Expenses 551--Basis of Assets 552--Recordkeeping for Individuals 554--Older Americans' Tax Guide 555--Community Property 556--Examination of Returns, Appeal Rights, and Claims for Refund 559--Survivors, Executors, and Administrators 561--Determining the Value of Donated Property 564--Mutual Fund Distributions 570--Tax Guide for Individuals With Income From U. Irs freefile S. Irs freefile Possessions 571--Tax-Sheltered Annuity Plans (403(b) Plans) 575--Pension and Annuity Income 584--Casualty, Disaster, and Theft Loss Workbook (Personal-Use Property) 587--Business Use of Your Home (Including Use by Daycare Providers) 590--Individual Retirement Arrangements (IRAs) 593--Tax Highlights for U. Irs freefile S. Irs freefile Citizens and Residents Going Abroad 594--What You Should Know About the IRS Collection Process 596--Earned Income Credit (EIC) 721--Tax Guide to U. Irs freefile S. Irs freefile Civil Service Retirement Benefits 901--U. Irs freefile S. Irs freefile Tax Treaties 907--Tax Highlights for Persons with Disabilities 908--Bankruptcy Tax Guide 915--Social Security and Equivalent Railroad Retirement Benefits 919--How Do I Adjust My Tax Withholding? 925--Passive Activity and At-Risk Rules 926--Household Employer's Tax Guide 929--Tax Rules for Children and Dependents 936--Home Mortgage Interest Deduction 946--How to Depreciate Property 947--Practice Before the IRS and Power of Attorney 950--Introduction to Estate and Gift Taxes 967--The IRS Will Figure Your Tax 969--Health Savings Accounts and Other Tax-Favored Health Plans 970--Tax Benefits for Education 971--Innocent Spouse Relief 972--Child Tax Credit 1542--Per Diem Rates 1544--Reporting Cash Payments of Over $10,000 (Received in a Trade or Business) 1546--The Taxpayer Advocate Service of the IRS - How to Get Help With Unresolved Tax Problems Spanish Language Publications. Irs freefile   1SP--Derechos del Contribuyente 579SP--Cómo Preparar la Declaración de Impuesto Federal 594SP--Que es lo que Debemos Saber sobre el Proceso de Cobro del IRS 596SP--Crédito por Ingreso del Trabajo 850--English-Spanish Glossary of Words and Phrases Used in Publications Issued by the Internal Revenue Service 1544SP--Informe de Pagos en Efectivo en Exceso de $10,000 (Recibidos en una Ocupación o Negocio) Commonly Used Tax Forms. Irs freefile  See How To Get Tax Help for a variety of ways to get forms, including by computer, fax, phone, and mail. Irs freefile 1040--U. Irs freefile S. Irs freefile Individual Income Tax Return Schedule A&B--Itemized Deductions & Interest and Ordinary Dividends Schedule C--Profit or Loss From Business Schedule C-EZ--Net Profit From Business Schedule D--Capital Gains and Losses Schedule D-1--Continuation Sheet for Schedule D Schedule E--Supplemental Income and Loss Schedule EIC--Earned Income Credit Schedule F--Profit or Loss From Farming Schedule H--Household Employment Taxes Schedule J--Income Averaging for Farmers and Fishermen Schedule R--Credit for the Elderly or the Disabled Schedule SE--Self-Employment Tax 1040A--U. Irs freefile S. Irs freefile Individual Income Tax Return Schedule 1--Interest and Ordinary Dividends for Form 1040A Filers Schedule 2--Child and Dependent Care Expenses for Form 1040A Filers Schedule 3--Credit for the Elderly or the Disabled for Form 1040A Filers 1040EZ--Income Tax Return for Single and Joint Filers With No Dependents 1040-ES--Estimated Tax for Individuals 1040X--Amended U. Irs freefile S. Irs freefile Individual Income Tax Return 2106--Employee Business Expenses 2106-EZ--Unreimbursed Employee Business Expenses 2210--Underpayment of Estimated Tax by Individuals, Estates, and Trusts 2441--Child and Dependent Care Expenses 2848--Power of Attorney and Declaration of Representative 3903--Moving Expenses 4562--Depreciation and Amortization 4868--Application for Automatic Extension of Time To File U. Irs freefile S. Irs freefile Individual Income Tax Return 4952--Investment Interest Expense Deduction 5329--Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts 6251--Alternative Minimum Tax--Individuals 8283--Noncash Charitable Contributions 8582--Passive Activity Loss Limitations 8606--Nondeductible IRAs 8812--Additional Child Tax Credit 8822--Change of Address 8829--Expenses for Business Use of Your Home 8863--Education Credits 9465--Installment Agreement Request Prev  Up  Next   Home   More Online Publications
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Irs freefile Publication 587 - Main Content Table of Contents Qualifying for a DeductionExclusive Use Regular Use Trade or Business Use Principal Place of Business Place To Meet Patients, Clients, or Customers Separate Structure Figuring the DeductionUsing Actual Expenses Using the Simplified Method Daycare Facility Standard meal and snack rates. Irs freefile Sale or Exchange of Your HomeGain on Sale Depreciation Basis Adjustment Reporting the Sale More Information Business Furniture and EquipmentListed Property Property Bought for Business Use Personal Property Converted to Business Use Recordkeeping Where To DeductSelf-Employed Persons Employees Partners How To Get Tax HelpLow Income Taxpayer Clinics Worksheet To Figure the Deduction for Business Use of Your HomeInstructions for the Worksheet Worksheets To Figure the Deduction for Business Use of Your Home (Simplified Method) Instructions for the Simplified Method Worksheet Instructions for the Daycare Facility Worksheet Instructions for the Area Adjustment Worksheet Qualifying for a Deduction 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. Irs freefile However, you may be able to deduct expenses related to the business use of part of your home if you meet specific requirements. Irs freefile Even then, the deductible amount of these types of expenses may be limited. Irs freefile Use this section and Figure A, later, to decide if you can deduct expenses for the business use of your home. Irs freefile To qualify to deduct expenses for business use of your home, you must use part of your home: Exclusively and regularly as your principal place of business (defined later), 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, In the case of a separate structure which is not attached to your home, in connection with your trade or business, On a regular basis for certain storage use (see Storage of inventory or product samples , later), For rental use (see Publication 527), or As a daycare facility (see Daycare Facility , later). Irs freefile Additional tests for employee use. Irs freefile   If you are an employee and you use a part of your home for business, you may qualify for a deduction for its business use. Irs freefile You must meet the tests discussed earlier plus: Your business use must be for the convenience of your employer, and You must not rent any part of your home to your employer and use the rented portion to perform services as an employee for that employer. Irs freefile If the use of the home office is merely appropriate and helpful, you cannot deduct expenses for the business use of your home. Irs freefile Exclusive Use To qualify under the exclusive use test, you must use a specific area of your home only for your trade or business. Irs freefile The area used for business can be a room or other separately identifiable space. Irs freefile The space does not need to be marked off by a permanent partition. Irs freefile 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. Irs freefile Example. Irs freefile You are an attorney and use a den in your home to write legal briefs and prepare clients' tax returns. Irs freefile Your family also uses the den for recreation. Irs freefile The den is not used exclusively in your trade or business, so you cannot claim a deduction for the business use of the den. Irs freefile Exceptions to Exclusive Use You do not have to meet the exclusive use test if either of the following applies. Irs freefile You use part of your home for the storage of inventory or product samples (discussed next). Irs freefile You use part of your home as a daycare facility, discussed later under Daycare Facility . Irs freefile Note. Irs freefile With the exception of these two uses, any portion of the home used for business purposes must meet the exclusive use test. Irs freefile Storage of inventory or product samples. Irs freefile    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. Irs freefile However, you must meet all the following tests. Irs freefile You sell products at wholesale or retail as your trade or business. Irs freefile You keep the inventory or product samples in your home for use in your trade or business. Irs freefile Your home is the only fixed location of your trade or business. Irs freefile You use the storage space on a regular basis. Irs freefile The space you use is a separately identifiable space suitable for storage. Irs freefile Example. Irs freefile Your home is the only fixed location of your business of selling mechanics' tools at retail. Irs freefile You regularly use half of your basement for storage of inventory and product samples. Irs freefile You sometimes use the area for personal purposes. Irs freefile The expenses for the storage space are deductible even though you do not use this part of your basement exclusively for business. Irs freefile Regular Use To qualify under the regular use test, you must use a specific area of your home for business on a regular basis. Irs freefile Incidental or occasional business use is not regular use. Irs freefile You must consider all facts and circumstances in determining whether your use is on a regular basis. Irs freefile Trade or Business Use To qualify under the trade-or-business-use test, you must use part of your home in connection with a trade or business. Irs freefile 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. Irs freefile Example. Irs freefile 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. Irs freefile You do not make investments as a broker or dealer. Irs freefile So, your activities are not part of a trade or business and you cannot take a deduction for the business use of your home. Irs freefile Principal Place of Business You can have more than one business location, including your home, for a single trade or business. Irs freefile 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. Irs freefile To determine whether your home is your principal place of business, you must consider: The relative importance of the activities performed at each place where you conduct business, and The amount of time spent at each place where you conduct business. Irs freefile Your home office will qualify as your principal place of business if you meet the following requirements. Irs freefile You use it exclusively and regularly for administrative or management activities of your trade or business. Irs freefile You have no other fixed location where you conduct substantial administrative or management activities of your trade or business. Irs freefile If, after considering your business locations, your home cannot be identified as your principal place of business, you cannot deduct home office expenses. Irs freefile 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. Irs freefile Administrative or management activities. Irs freefile   There are many activities that are administrative or managerial in nature. Irs freefile The following are a few examples. Irs freefile Billing customers, clients, or patients. Irs freefile Keeping books and records. Irs freefile Ordering supplies. Irs freefile Setting up appointments. Irs freefile Forwarding orders or writing reports. Irs freefile Administrative or management activities performed at other locations. Irs freefile   The following activities performed by you or others will not disqualify your home office from being your principal place of business. Irs freefile You have others conduct your administrative or management activities at locations other than your home. Irs freefile (For example, another company does your billing from its place of business. Irs freefile ) 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. Irs freefile You occasionally conduct minimal administrative or management activities at a fixed location outside your home. Irs freefile You conduct substantial nonadministrative or nonmanagement business activities at a fixed location outside your home. Irs freefile (For example, you meet with or provide services to customers, clients, or patients at a fixed location of the business outside your home. Irs freefile ) You have suitable space to conduct administrative or management activities outside your home, but choose to use your home office for those activities instead. Irs freefile Please click here for the text description of the image. Irs freefile Can you deduct business use of the home expenses? Example 1. Irs freefile John is a self-employed plumber. Irs freefile Most of John's time is spent at customers' homes and offices installing and repairing plumbing. Irs freefile 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. Irs freefile John writes up estimates and records of work completed at his customers' premises. Irs freefile He does not conduct any substantial administrative or management activities at any fixed location other than his home office. Irs freefile John does not do his own billing. Irs freefile He uses a local bookkeeping service to bill his customers. Irs freefile John's home office qualifies as his principal place of business for deducting expenses for its use. Irs freefile 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. Irs freefile His choice to have his billing done by another company does not disqualify his home office from being his principal place of business. Irs freefile 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. Irs freefile Example 2. Irs freefile Pamela is a self-employed sales representative for several different product lines. Irs freefile 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. Irs freefile She occasionally writes up orders and sets up appointments from her hotel room when she is away on business overnight. Irs freefile Pamela's business is selling products to customers at various locations throughout her territory. Irs freefile To make these sales, she regularly visits customers to explain the available products and take orders. Irs freefile Pamela's home office qualifies as her principal place of business for deducting expenses for its use. Irs freefile She conducts administrative or management activities there and she has no other fixed location where she conducts substantial administrative or management activities. Irs freefile 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. Irs freefile 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. Irs freefile Example 3. Irs freefile Paul is a self-employed anesthesiologist. Irs freefile He spends the majority of his time administering anesthesia and postoperative care in three local hospitals. Irs freefile One of the hospitals provides him with a small shared office where he could conduct administrative or management activities. Irs freefile Paul very rarely uses the office the hospital provides. Irs freefile He uses a room in his home that he has converted to an office. Irs freefile He uses this room exclusively and regularly to conduct all the following activities. Irs freefile Contacting patients, surgeons, and hospitals regarding scheduling. Irs freefile Preparing for treatments and presentations. Irs freefile Maintaining billing records and patient logs. Irs freefile Satisfying continuing medical education requirements. Irs freefile Reading medical journals and books. Irs freefile Paul's home office qualifies as his principal place of business for deducting expenses for its use. Irs freefile 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. Irs freefile 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. Irs freefile 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. Irs freefile 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. Irs freefile Example 4. Irs freefile Kathleen is employed as a teacher. Irs freefile She is required to teach and meet with students at the school and to grade papers and tests. Irs freefile The school provides her with a small office where she can work on her lesson plans, grade papers and tests, and meet with parents and students. Irs freefile The school does not require her to work at home. Irs freefile Kathleen prefers to use the office she has set up in her home and does not use the one provided by the school. Irs freefile She uses this home office exclusively and regularly for the administrative duties of her teaching job. Irs freefile Kathleen must meet the convenience-of-the-employer test, even if her home qualifies as her principal place of business for deducting expenses for its use. Irs freefile Her employer provides her with an office and does not require her to work at home, so she does not meet the convenience-of-the-employer test and cannot claim a deduction for the business use of her home. Irs freefile More Than One Trade or Business The same home office can be the principal place of business for two or more separate business activities. Irs freefile 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. Irs freefile You must use the home office exclusively and regularly for one or more of the following purposes. Irs freefile As the principal place of business for one or more of your trades or businesses. Irs freefile 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. Irs freefile If your home office is a separate structure, in connection with one or more of your trades or businesses. Irs freefile You can use your home office for more than one business activity, but you cannot use it for any nonbusiness (i. Irs freefile e. Irs freefile , personal) activities. Irs freefile If you are an employee, any use of the home office in connection with your employment must be for the convenience of your employer. Irs freefile See Rental to employer , later, if you rent part of your home to your employer. Irs freefile Example. Irs freefile Tracy White is employed as a teacher. Irs freefile Her principal place of work is the school, which provides her office space to do her school work. Irs freefile She also has a mail order jewelry business. Irs freefile All her work in the jewelry business is done in her home office and the office is used exclusively for that business. Irs freefile If she meets all the other tests, she can deduct expenses for the business use of her home for the jewelry business. Irs freefile If Tracy also uses the office for work related to her teaching, she must meet the exclusive use test for both businesses to qualify for the deduction. Irs freefile As an employee, Tracy must also meet the convenience-of-the-employer test to qualify for the deduction. Irs freefile She does not meet this test for her work as a teacher, so she cannot claim a deduction for the business use of her home for either activity. Irs freefile Place To Meet Patients, Clients, or Customers 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. Irs freefile You physically meet with patients, clients, or customers on your premises. Irs freefile Their use of your home is substantial and integral to the conduct of your business. Irs freefile Doctors, dentists, attorneys, and other professionals who maintain offices in their homes generally will meet this requirement. Irs freefile Using your home for occasional meetings and telephone calls will not qualify you to deduct expenses for the business use of your home. Irs freefile 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. Irs freefile Example. Irs freefile June Quill, a self-employed attorney, works 3 days a week in her city office. Irs freefile She works 2 days a week in her home office used only for business. Irs freefile She regularly meets clients there. Irs freefile Her home office qualifies for a business deduction because she meets clients there in the normal course of her business. Irs freefile Separate Structure 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. Irs freefile The structure does not have to be your principal place of business or a place where you meet patients, clients, or customers. Irs freefile Example. Irs freefile John Berry operates a floral shop in town. Irs freefile He grows the plants for his shop in a greenhouse behind his home. Irs freefile 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. Irs freefile Figuring the Deduction After you determine that you meet the tests under Qualifying for a Deduction , you can begin to figure how much you can deduct. Irs freefile 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. Irs freefile Electing to use the simplified method. Irs freefile   The simplified method is an alternative to the calculation, allocation, and substantiation of actual expenses. Irs freefile You choose whether or not to figure your deduction using the simplified method each taxable year. Irs freefile See Using the Simplified Method , later. Irs freefile Rental to employer. Irs freefile   If you rent part of your home to your employer and you use the rented part in performing services for your employer as an employee, your deduction for the business use of your home is limited. Irs freefile You can deduct mortgage interest, qualified mortgage insurance premiums, real estate taxes, and personal casualty losses for the rented part, subject to any limitations. Irs freefile However, you cannot deduct otherwise allowable trade or business expenses, business casualty losses, or depreciation related to the use of your home (or use the simplified method as an alternative to deducting these actual expenses) in performing services for your employer. Irs freefile Using Actual Expenses 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. Irs freefile You will also need to figure the percentage of your home used for business and the limit on the deduction. Irs freefile If you are an employee or 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. Irs freefile 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. Irs freefile Part-year use. Irs freefile   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. Irs freefile 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. Irs freefile Expenses related to tax-exempt income. Irs freefile   Generally, you cannot deduct expenses that are related to tax-exempt allowances. Irs freefile However, if you receive a tax-exempt parsonage allowance or a tax-exempt military allowance, your expenses for mortgage interest and real estate taxes are deductible under the normal rules. Irs freefile No deduction is allowed for other expenses related to the tax-exempt allowance. Irs freefile   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. Irs freefile Actual Expenses You must divide the expenses of operating your home between personal and business use. Irs freefile The part of a home operating expense you can use to figure your deduction depends on both of the following. Irs freefile Whether the expense is direct, indirect, or unrelated. Irs freefile The percentage of your home used for business. Irs freefile Table 1, next, describes the types of expenses you may have and the extent to which they are deductible. Irs freefile Table 1. Irs freefile Types of Expenses  Expense  Description  Deductibility Direct Expenses only for  the business part  of your home. Irs freefile Deductible in full. Irs freefile *   Examples:  Painting or repairs  only in the area  used for business. Irs freefile Exception: May be only partially  deductible in a daycare facility. Irs freefile See Daycare Facility , later. Irs freefile Indirect Expenses for  keeping up and running your  entire home. Irs freefile Deductible based on the percentage of your home used for business. Irs freefile *   Examples:  Insurance, utilities, and  general repairs. Irs freefile   Unrelated Expenses only for  the parts of your  home not used  for business. Irs freefile Not deductible. Irs freefile   Examples:  Lawn care or painting  a room not used  for business. Irs freefile   *Subject to the deduction limit, discussed later. Irs freefile Form 8829 and the Worksheet To Figure the Deduction for Business Use of Your Home have separate columns for direct and indirect expenses. Irs freefile Certain expenses are deductible whether or not you use your home for business. Irs freefile If you qualify to deduct business use of the home expenses, use the business percentage of these expenses to figure your total business use of the home deduction. Irs freefile These expenses include the following. Irs freefile Real estate taxes. Irs freefile Qualified mortgage insurance premiums. Irs freefile Deductible mortgage interest. Irs freefile Casualty losses. Irs freefile Other expenses are deductible only if you use your home for business. Irs freefile You can use the business percentage of these expenses to figure your total business use of the home deduction. Irs freefile These expenses generally include (but are not limited to) the following. Irs freefile Depreciation (covered under Depreciating Your Home , later). Irs freefile Insurance. Irs freefile Rent paid for the use of property you do not own but use in your trade or business. Irs freefile Repairs. Irs freefile Security system. Irs freefile Utilities and services. Irs freefile Real estate taxes. Irs freefile   To figure the business part of your real estate taxes, multiply the real estate taxes paid by the percentage of your home used for business. Irs freefile   For more information on the deduction for real estate taxes, see Publication 530, Tax Information for Homeowners. Irs freefile Deductible mortgage interest. Irs freefile   To figure the business part of your deductible mortgage interest, multiply this interest by the percentage of your home used for business. Irs freefile You can include interest on a second mortgage in this computation. Irs freefile If your total mortgage debt is more than $1,000,000 or your home equity debt is more than $100,000, your deduction may be limited. Irs freefile For more information on what interest is deductible, see Publication 936, Home Mortgage Interest Deduction. Irs freefile Qualified mortgage insurance premiums. Irs freefile   To figure the business part of your qualified mortgage insurance premiums, multiply the premiums by the percentage of your home used for business. Irs freefile You can include premiums for insurance on a second mortgage in this computation. Irs freefile If your adjusted gross income is more than $100,000 ($50,000 if your filing status is married filing separately), your deduction may be limited. Irs freefile For more information, see Publication 936, and Line 13 in the Instructions for Schedule A (Form 1040). Irs freefile Casualty losses. Irs freefile    If you have a casualty loss on your home that you use for business, treat the casualty loss as a direct expense, an indirect expense, or an unrelated expense, depending on the property affected. Irs freefile A direct expense is the loss on the portion of the property you use only in your business. Irs freefile Use the entire loss to figure the business use of the home deduction. Irs freefile An indirect expense is the loss on property you use for both business and personal purposes. Irs freefile Use only the business portion to figure the deduction. Irs freefile An unrelated expense is the loss on property you do not use in your business. Irs freefile Do not use any of the loss to figure the deduction. Irs freefile Example. Irs freefile You meet the rules to take a deduction for an office in your home that is 10% of the total area of your house. Irs freefile A storm damages your roof. Irs freefile This is an indirect expense as the roof is part of the whole house and is considered to be used both for business and personal purposes. Irs freefile You would complete Form 4684, Casualties and Thefts, to report your loss. Irs freefile You complete both section A (Personal Use Property) and section B (Business and Income-Producing Property) as your home is used both for business and personal purposes. Irs freefile Since you use 90% of your home for personal purposes, use 90% of the cost or adjusted basis of your home, insurance or other reimbursement, and fair market value, both before and after the storm, to figure the amounts to enter on lines 2, 3, 5, and 6 of Form 4684. Irs freefile Since you use 10% of your home for business purposes, use 10% of the cost or adjusted basis of your home, insurance or other reimbursement, and fair market value, both before and after the storm, to figure the amounts to enter on lines 20, 21, 23, and 24 of Form 4684. Irs freefile Forms and worksheets to use. Irs freefile   If you are filing Schedule C (Form 1040), get Form 8829 and follow the instructions for casualty losses. Irs freefile If you are an employee or 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. Irs freefile You will also need to get Form 4684. Irs freefile More information. Irs freefile   For more information on casualty losses, see Publication 547, Casualties, Disasters, and Thefts. Irs freefile Insurance. Irs freefile   You can deduct the cost of insurance that covers the business part of your home. Irs freefile 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. Irs freefile You can deduct the business percentage of the part that applies to the following year in that year. Irs freefile Rent. Irs freefile   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. Irs freefile To figure your deduction, multiply your rent payments by the percentage of your home used for business. Irs freefile   If you own your home, you cannot deduct the fair rental value of your home. Irs freefile However, see Depreciating Your Home , later. Irs freefile Repairs. Irs freefile   The cost of repairs that relate to your business, including labor (other than your own labor), is a deductible expense. Irs freefile For example, a furnace repair benefits the entire home. Irs freefile If you use 10% of your home for business, you can deduct 10% of the cost of the furnace repair. Irs freefile   Repairs keep your home in good working order over its useful life. Irs freefile Examples of common repairs are patching walls and floors, painting, wallpapering, repairing roofs and gutters, and mending leaks. Irs freefile However, repairs are sometimes treated as a permanent improvement and are not deductible. Irs freefile See Permanent improvements , later, under Depreciating Your Home. Irs freefile Security system. Irs freefile   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. Irs freefile You also can take a depreciation deduction for the part of the cost of the security system relating to the business use of your home. Irs freefile Utilities and services. Irs freefile   Expenses for utilities and services, such as electricity, gas, trash removal, and cleaning services, are primarily personal expenses. Irs freefile However, if you use part of your home for business, you can deduct the business part of these expenses. Irs freefile Generally, the business percentage for utilities is the same as the percentage of your home used for business. Irs freefile Telephone. Irs freefile   The basic local telephone service charge, including taxes, for the first telephone line into your home (i. Irs freefile e. Irs freefile , landline) is a nondeductible personal expense. Irs freefile 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. Irs freefile Do not include these expenses as a cost of using your home for business. Irs freefile Deduct these charges separately on the appropriate form or schedule. Irs freefile 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). Irs freefile Depreciating Your Home If you own your home and qualify to deduct expenses for its business use, you can claim a deduction for depreciation. Irs freefile Depreciation is an allowance for the wear and tear on the part of your home used for business. Irs freefile You cannot depreciate the cost or value of the land. Irs freefile You recover its cost when you sell or otherwise dispose of the property. Irs freefile Before you figure your depreciation deduction, you need to know the following information. Irs freefile The month and year you started using your home for business. Irs freefile The adjusted basis and fair market value of your home (excluding land) at the time you began using it for business. Irs freefile The cost of any improvements before and after you began using the property for business. Irs freefile The percentage of your home used for business. Irs freefile See Business Percentage , later. Irs freefile Adjusted basis defined. Irs freefile   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. Irs freefile For a discussion of adjusted basis, see Publication 551. Irs freefile Permanent improvements. Irs freefile   A permanent improvement increases the value of property, adds to its life, or gives it a new or different use. Irs freefile Examples of improvements are replacing electric wiring or plumbing, adding a new roof or addition, paneling, or remodeling. Irs freefile    You must carefully distinguish between repairs and improvements. Irs freefile See Repairs , earlier, under Actual Expenses. Irs freefile You also must keep accurate records of these expenses. Irs freefile These records will help you decide whether an expense is a deductible or a capital (added to the basis) expense. Irs freefile However, if you make repairs as part of an extensive remodeling or restoration of your home, the entire job is an improvement. Irs freefile Example. Irs freefile You buy an older home and fix up two rooms as a beauty salon. Irs freefile 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. Irs freefile Normally, the patching, painting, and floor work are repairs and the other expenses are permanent improvements. Irs freefile 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. Irs freefile You cannot deduct any portion of it as a repair expense. Irs freefile Adjusting for depreciation deducted in earlier years. Irs freefile   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. Irs freefile 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. Irs freefile If you did not deduct any depreciation, decrease the basis by the amount you could have deducted. Irs freefile   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. Irs freefile   If you deducted the incorrect amount of depreciation, see Publication 946. Irs freefile Fair market value defined. Irs freefile   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. Irs freefile 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. Irs freefile Figuring the depreciation deduction for the current year. Irs freefile   If you began using your home for business before 2013, continue to use the same depreciation method you used in past tax years. Irs freefile   If you began using your home for business for the first time in 2013, depreciate the business part as nonresidential real property under the modified accelerated cost recovery system (MACRS). Irs freefile Under MACRS, nonresidential real property is depreciated using the straight line method over 39 years. Irs freefile For more information on MACRS and other methods of depreciation, see Publication 946. Irs freefile   To figure the depreciation deduction, you must first figure the part of the cost of your home that can be depreciated (depreciable basis). Irs freefile The depreciable basis is figured by multiplying the percentage of your home used for business by the smaller of the following. Irs freefile The adjusted basis of your home (excluding land) on the date you began using your home for business. Irs freefile The fair market value of your home (excluding land) on the date you began using your home for business. Irs freefile Depreciation table. Irs freefile   If 2013 was the first year you used your home for business, you can figure your 2013 depreciation for the business part of your home by using the appropriate percentage from the following table. Irs freefile Table 2. Irs freefile MACRS Percentage Table for 39-Year Nonresidential Real Property Month First Used for Business Percentage To Use 1 2. Irs freefile 461% 2 2. Irs freefile 247% 3 2. Irs freefile 033% 4 1. Irs freefile 819% 5 1. Irs freefile 605% 6 1. Irs freefile 391% 7 1. Irs freefile 177% 8 0. Irs freefile 963% 9 0. Irs freefile 749% 10 0. Irs freefile 535% 11 0. Irs freefile 321% 12 0. Irs freefile 107%   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. Irs freefile See Publication 946 for the percentages for the remaining tax years of the recovery period. Irs freefile Example. Irs freefile In May, George Miller began to use one room in his home exclusively and regularly to meet clients. Irs freefile This room is 8% of the square footage of his home. Irs freefile He bought the home in 2003 for $125,000. Irs freefile He determined from his property tax records that his adjusted basis in the house (exclusive of land) is $115,000. Irs freefile In May, the house had a fair market value of $165,000. Irs freefile He multiplies his adjusted basis of $115,000 (which is less than the fair market value) by 8%. Irs freefile The result is $9,200, his depreciable basis for the business part of the house. Irs freefile George files his return based on the calendar year. Irs freefile May is the 5th month of his tax year. Irs freefile He multiplies his depreciable basis of $9,200 by 1. Irs freefile 605% (. Irs freefile 01605), the percentage from the table for the 5th month. Irs freefile His depreciation deduction is $147. Irs freefile 66. Irs freefile Depreciating permanent improvements. Irs freefile   Add the costs of permanent improvements made before you began using your home for business to the basis of your property. Irs freefile Depreciate these costs as part of the cost of your home as explained earlier. Irs freefile 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. Irs freefile 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. Irs freefile For improvements made this year, the recovery period is 39 years. Irs freefile For the percentage to use for the first year, see Table 2, earlier. Irs freefile For more information on recovery periods, see Publication 946. Irs freefile Business Percentage To find the business percentage, compare the size of the part of your home that you use for business to your whole house. Irs freefile Use the resulting percentage to figure the business part of the expenses for operating your entire home. Irs freefile You can use any reasonable method to determine the business percentage. Irs freefile The following are two commonly used methods for figuring the percentage. Irs freefile Divide the area (length multiplied by the width) used for business by the total area of your home. Irs freefile 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. Irs freefile Example 1. Irs freefile Your office is 240 square feet (12 feet × 20 feet). Irs freefile Your home is 1,200 square feet. Irs freefile Your office is 20% (240 ÷ 1,200) of the total area of your home. Irs freefile Your business percentage is 20%. Irs freefile Example 2. Irs freefile You use one room in your home for business. Irs freefile Your home has 10 rooms, all about equal size. Irs freefile Your office is 10% (1 ÷ 10) of the total area of your home. Irs freefile Your business percentage is 10%. Irs freefile 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. Irs freefile Deduction Limit 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. Irs freefile 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. Irs freefile 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. Irs freefile The business part of expenses you could deduct even if you did not use your home for business (such as mortgage interest, real estate taxes, and casualty and theft losses that are allowable as itemized deductions on Schedule A (Form 1040)). Irs freefile These expenses are discussed in detail under Actual Expenses , earlier. Irs freefile 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. Irs freefile If you are self-employed, do not include in (2) above your deduction for one-half of your self-employment tax. Irs freefile Carryover of unallowed expenses. Irs freefile   If your deductions are greater than the current year's limit, you can carry over the excess to the next year in which you use actual expenses. Irs freefile They are subject to the deduction limit for that year, whether or not you live in the same home during that year. Irs freefile Figuring the deduction limit and carryover. Irs freefile   If you are an employee or 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. Irs freefile If you file Schedule C (Form 1040), figure your deduction limit and carryover on Form 8829. Irs freefile Example. Irs freefile You meet the requirements for deducting expenses for the business use of your home. Irs freefile You use 20% of your home for business. Irs freefile In 2013, your business expenses and the expenses for the business use of your home are deducted from your gross income in the following order. Irs freefile    Gross income from business $6,000 Minus:   Deductible mortgage interest and real estate taxes (20%) 3,000 Business expenses not related to the use of your home (100%) (business phone, supplies, and depreciation on equipment) 2,000 Deduction limit $1,000 Minus other expenses allocable to business use of home:   Maintenance, insurance, and utilities (20%) 800 Depreciation allowed (20% = $1,600 allowable, but subject to balance of deduction limit) 200 Other expenses up to the deduction limit $1,000 Depreciation carryover to 2014 ($1,600 − $200) (subject to deduction limit in 2014) $1,400   You can deduct all of the business part of your deductible mortgage interest and real estate taxes ($3,000). Irs freefile You also can deduct all of your business expenses not related to the use of your home ($2,000). Irs freefile 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. Irs freefile Your deduction for depreciation for the business use of your home is limited to $200 ($1,000 minus $800) because of the deduction limit. Irs freefile You can carry over the $1,400 balance and add it to your depreciation for 2014, subject to your deduction limit in 2014. Irs freefile More than one place of business. Irs freefile   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. Irs freefile 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. Irs freefile 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. Irs freefile For more information on transportation costs, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. Irs freefile Using the Simplified Method The simplified method is an alternative to the calculation, allocation, and substantiation of actual expenses. Irs freefile 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. Irs freefile The area you use to figure your deduction is limited to 300 square feet. Irs freefile See Simplified Amount , later, for information about figuring the amount of the deduction. Irs freefile For more information about the simplified method, see Revenue Procedure 2013-13, 2013-06 I. Irs freefile R. Irs freefile B. Irs freefile 478, available at www. Irs freefile irs. Irs freefile gov/irb/2013-06_IRB/ar09. Irs freefile html. Irs freefile Actual expenses and depreciation of your home. Irs freefile   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. Irs freefile 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. Irs freefile The depreciation deduction allowable for that portion of the home is deemed to be zero for a year you use the simplified method. Irs freefile 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. Irs freefile More information. Irs freefile   For more information about claiming depreciation in a subsequent year, see Revenue Procedure 2013-13, 2013-06 I. Irs freefile R. Irs freefile B. Irs freefile 478, available at www. Irs freefile irs. Irs freefile gov/irb/2013-06_IRB/ar09. Irs freefile html. Irs freefile See Publication 946 for the optional depreciation tables 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). Irs freefile Expenses deductible without regard to business use. Irs freefile   When using the simplified method, treat as personal expenses those business expenses related to the use of the home that are deductible without regard to whether there is a qualified business use of the home. Irs freefile These expenses include mortgage interest, real estate taxes, and casualty losses, subject to any limitations. Irs freefile See Where To Deduct , later. Irs freefile 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). Irs freefile No deduction of carryover of actual expenses. Irs freefile   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. Irs freefile Instead, you will continue to carry over the disallowed amount to the next year that you use actual expenses to figure your deduction. Irs freefile Electing the Simplified Method You choose whether or not to figure your deduction using the simplified method each taxable year. Irs freefile 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. Irs freefile An election for a taxable year, once made, is irrevocable. Irs freefile A change from using the simplified method in one year to actual expenses in a succeeding taxable year, or vice-versa, is not a change in method of accounting and does not require the consent of the Commissioner. Irs freefile Shared use. Irs freefile   If you share your home with someone else who also uses the home in a business that qualifies for this deduction, each of you make your own election. Irs freefile More than one qualified business use. Irs freefile   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. Irs freefile More than one home. Irs freefile   If you used more than one home during the year (for example, you moved during the year), you can elect to use the simplified method for only one of the homes. Irs freefile You must figure the deduction for any other home using actual expenses. Irs freefile Simplified Amount 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. Irs freefile 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. Irs freefile The allowable area of your home used in conducting the business. Irs freefile 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. Irs freefile The gross income from the business use of your home. Irs freefile The amount of the business expenses that are not related to the use of your home. Irs freefile 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 also need to know the percentage of time that part of your home is used for daycare. Irs freefile To figure the amount you can deduct for qualified business use of your home using the simplified method, follow these 3 steps. Irs freefile 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). Irs freefile See Allowable area and Space used regularly for daycare , later. Irs freefile 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. Irs freefile 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. Irs freefile See Gross income limitation , later. Irs freefile Take the smaller of the amounts from (1) and (2). Irs freefile This is the amount you can deduct for this qualified business use of your home using the simplified method. Irs freefile If you are an employee or 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. Irs freefile 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. Irs freefile Allowable area. Irs freefile   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. Irs freefile 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. Irs freefile 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. Irs freefile Area used by a qualified joint venture. Irs freefile   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. Irs freefile Split the actual area used in conducting business between you and your spouse in the same manner you split your other tax attributes. Irs freefile Then, each spouse will figure the allowable area separately. Irs freefile For more information about qualified joint ventures, see Qualified Joint Venture in the Instructions for Schedule C. Irs freefile Shared use. Irs freefile   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. Irs freefile You must allocate the shared space between you and the other person in a reasonable manner. Irs freefile Example. Irs freefile Kristin and Lindsey are roommates. Irs freefile Kristin uses 300 square feet of their home for a qualified business use. Irs freefile Lindsey uses 200 square feet of their home for a separate qualified business use. Irs freefile The qualified business uses share 100 square feet. Irs freefile In addition to the portion that they do not share, Kristin and Lindsey can both claim 50 of the 100 square feet or divide the 100 square feet between them in any reasonable manner. Irs freefile If divided evenly, Kristin could claim 250 square feet using the simplified method and Lindsey could claim 150 square feet. Irs freefile More than one qualified business use. Irs freefile   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. Irs freefile Allocate the actual square footage used (up to the maximum of 300 square feet) among your qualified business uses in a reasonable manner. Irs freefile However, do not allocate more square feet to a qualified business use than you actually use for that business. Irs freefile Rental use. Irs freefile   The simplified method does not apply to rental use. Irs freefile A rental use that qualifies for the deduction must be figured using actual expenses. Irs freefile 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. Irs freefile 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. Irs freefile Part-year use or area changes. Irs freefile   If your qualified business use was for a portion of the taxable year (for example, a seasonal business or a business that begins during the taxable year) or you changed the square footage of your qualified business use, your deduction is limited to the average monthly allowable square footage. Irs freefile 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. Irs freefile When determining the average monthly allowable square footage, you cannot take more than 300 square feet into account for any one month. Irs freefile Additionally, if your qualified business use was less than 15 days in a month, you must use -0- for that month. Irs freefile Example 1. Irs freefile Andy files his federal income tax return on a calendar year basis. Irs freefile On July 20, he began using 420 square feet of his home for a qualified business use. Irs freefile He continued to use the 420 square feet until the end of the year. Irs freefile 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 taxable year ((0 + 0 + 0 + 0 + 0 + 0 + 0 + 300 + 300 + 300 + 300 + 300)/12). Irs freefile Example 2. Irs freefile Amy files her federal income tax return on a calendar year basis. Irs freefile On April 20, she began using 100 square feet of her home for a qualified business use. Irs freefile On August 5, she expanded the area of her qualified use to 330 square feet. Irs freefile Amy continued to use the 330 square feet until the end of the year. Irs freefile 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 taxable year ((0 + 0 + 0 + 0 + 100 + 100 +100 + 300 + 300 + 300 + 300 + 300)/12). Irs freefile Gross income limitation. Irs freefile   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. Irs freefile 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. Irs freefile Business expenses not related to use of the home. Irs freefile   These expenses relate to the business activity in the home, but not to the use of the home itself. Irs freefile You can still deduct business expenses that are unrelated to the use of the home. Irs freefile See Where To Deduct , later. Irs freefile Examples of business expenses that are unrelated to the use of the home are advertising, wages, supplies, dues, and depreciation for equipment. Irs freefile Space used regularly for daycare. Irs freefile   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. Irs freefile The reduced rate will equal the prescribed rate times a fraction. Irs freefile 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. Irs freefile You can use the Daycare Facility Worksheet (for simplified method), near the end of this publication, to help you figure the reduced rate. Irs freefile    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. Irs freefile Daycare Facility If you use space in your home on a regular basis for providing daycare, you may be able to claim a deduction for that part of your home even if you use the same space for nonbusiness purposes. Irs freefile To qualify for this exception to the exclusive use rule, you must meet both of the following requirements. Irs freefile You must be in the trade or business of providing daycare for children, persons age 65 or older, or persons who are physically or mentally unable to care for themselves. Irs freefile You must have applied for, been granted, or be exempt from having, a license, certification, registration, or approval as a daycare center or as a family or group daycare home under state law. Irs freefile You do not meet this requirement if your application was rejected or your license or other authorization was revoked. Irs freefile Figuring the deduction. Irs freefile   If you elect to use the simplified method for your home, figure your deduction as described earlier in Using the Simplified Method under Figuring the Deduction. Irs freefile    If you are figuring your deduction using actual expenses and you regularly use part of your home for daycare, figure what part is used for daycare, as explained in Business Percentage , earlier, under Figuring the Deduction. Irs freefile If you also use that part exclusively for daycare, deduct all the allocable expenses, subject to the deduction limit, as explained earlier. Irs freefile   If the use of part of your home as a daycare facility is regular, but not exclusive, you must figure the percentage of time that part of your home is used for daycare. Irs freefile A room that is available for use throughout each business day and that you regularly use in your business is considered to be used for daycare throughout each business day. Irs freefile You do not have to keep records to show the specific hours the area was used for business. Irs freefile You can use the area occasionally for personal reasons. Irs freefile However, a room you use only occasionally for business does not qualify for the deduction. Irs freefile To find the percentage of time you actually use your home for business, compare the total time used for business to the total time that part of your home can be used for all purposes. Irs freefile You can compare the hours of business use in a week with the number of hours in a week (168). Irs freefile Or you can compare the hours of business use for the year with the number of hours in the year (8,760 in 2013). Irs freefile If you started or stopped using your home for daycare in 2013, you must prorate the number of hours based on the number of days the home was available for daycare. Irs freefile Example 1. Irs freefile Mary Lake used her basement to operate a daycare business for children. Irs freefile She figures the business percentage of the basement as follows. Irs freefile Square footage of the basement Square footage of her home = 1,600 3,200 = 50%           She used the basement for daycare an average of 12 hours a day, 5 days a week, for 50 weeks a year. Irs freefile During the other 12 hours a day, the family could use the basement. Irs freefile She figures the percentage of time the basement was used for daycare as follows. Irs freefile Number of hours used for daycare (12 x 5 x 50) Total number of hours in the year (24 x 365) = 3,000 8,760 = 34. Irs freefile 25%           Mary can deduct 34. Irs freefile 25% of any direct expenses for the basement. Irs freefile However, because her indirect expenses are for the entire house, she can deduct only 17. Irs freefile 13% of the indirect expenses. Irs freefile She figures the percentage for her indirect expenses as follows. Irs freefile Business percentage of the basement 50% Multiplied by: Percentage of time used for daycare × 34. Irs freefile 25% Percentage for indirect expenses 17. Irs freefile 13% Mary completes Form 8829, Part I, figuring the percentage of her home used for business, including the percentage of time the basement was used. Irs freefile In Part II, Mary figures her deductible expenses. Irs freefile She uses the following information to complete Part II. Irs freefile Gross income from her daycare business $50,000 Expenses not related to the business use of the home $25,000 Tentative profit $25,000 Rent $8,400 Utilities $850 Painting the basement $500 Mary enters her tentative profit, $25,000, on line 8. Irs freefile (This figure is the same as the amount on line 29 of her Schedule C (Form 1040). Irs freefile ) The expenses she paid for rent and utilities relate to her entire home. Irs freefile Therefore, she enters the amount paid for rent on line 18, column (b), and the amount paid for utilities on line 20, column (b). Irs freefile She shows the total of these expenses on line 22, column (b). Irs freefile For line 23, she multiplies the amount on line 22, column (b) by the percentage on line 7 and enters the result, $1,585. Irs freefile Mary paid $500 to have the basement painted. Irs freefile The painting is a direct expense. Irs freefile However, because she did not use the basement exclusively for daycare, she must multiply $500 by the percentage of time the basement was used for daycare (34. Irs freefile 25% – line 6). Irs freefile She enters $171 (34. Irs freefile 25% × $500) on line 19, column (a). Irs freefile She adds line 22, column (a), and line 23 and enters $1,756 ($171 + $1,585) on line 25. Irs freefile This is less than her deduction limit (line 15), so she can deduct the entire amount. Irs freefile She follows the instructions to complete the rest of Part II and enters $1,756 on lines 33 and 35. Irs freefile She then carries the $1,756 to line 30 of her Schedule C (Form 1040). Irs freefile Example 2. Irs freefile Assume the same facts as in Example 1 except that Mary also has another room that was available each business day for children to take naps in. Irs freefile Although she did not keep a record of the number of hours the room was actually used for naps, it was used for part of each business day. Irs freefile Since the room was available for business use during regular operating hours each business day and was used regularly in the business, it is considered used for daycare throughout each business day. Irs freefile The basement and room are 60% of the total area of her home. Irs freefile In figuring her expenses, 34. Irs freefile 25% of any direct expenses for the basement and room are deductible. Irs freefile In addition, 20. Irs freefile 55% (34. Irs freefile 25% × 60%) of her indirect expenses are deductible. Irs freefile Example 3. Irs freefile Assume the same facts as in Example 1 except that Mary stopped using her home for a daycare facility on June 24, 2013. Irs freefile She used the basement for daycare an average of 12 hours a day, 5 days a week, but for only 25 weeks of the year. Irs freefile During the other 12 hours a day, the family could still use the basement. Irs freefile She figures the percentage of time the basement was used for business as follows. Irs freefile Number of hours used for daycare (12 x 5 x 25) Total number of hours during period used (24 x 175) = 1,500 4,200 = 35. Irs freefile 71%           Mary can deduct 35. Irs freefile 71% of any direct expenses for the basement. Irs freefile However, because her indirect expenses are for the entire house, she can deduct only 17. Irs freefile 86% of the indirect expenses. Irs freefile She figures the percentage for her indirect expenses as follows. Irs freefile Business percentage of the basement 50% Multiplied by: Percentage of time used for daycare × 35. Irs freefile 71% Percentage for indirect expenses 17. Irs freefile 86% Meals. Irs freefile   If you provide food for your daycare recipients, do not include the expense as a cost of using your home for business. Irs freefile Claim it as a separate deduction on your Schedule C (Form 1040). Irs freefile You can never deduct the cost of food consumed by you or your family. Irs freefile You can deduct as a business expense 100% of the actual cost of food consumed by your daycare recipients (see Standard meal and snack rates , later, for an optional method for eligible children) and generally only 50% of the cost of food consumed by your employees. Irs freefile However, you can deduct 100% of the cost of food consumed by your employees if its value can be excluded from their wages as a de minimis fringe benefit. Irs freefile For more information on meals that meet these requirements, see Meals in chapter 2 of Publication 15-B, Employer's Tax Guide to Fringe Benefits. Irs freefile   If you deduct the actual cost of food for your daycare business, keep a separate record (with receipts) of your family's food costs. Irs freefile   Reimbursements you receive from a sponsor under the Child and Adult Care Food Program of the Department of Agriculture are taxable only to the extent they exceed your expenses for food for eligible children. Irs freefile If your reimbursements are more than your expenses for food, show the difference as income in Part I of Schedule C (Form 1040). Irs freefile If your food expenses are greater than the reimbursements, show the difference as an expense in Part V of Schedule C (Form 1040). Irs freefile Do not include payments or expenses for your own children if they are eligible for the program. Irs freefile Follow this procedure even if you receive a Form 1099-MISC, Miscellaneous Income, reporting a payment from the sponsor. Irs freefile Standard meal and snack rates. Irs freefile   If you qualify as a family daycare provider, you can use the standard meal and snack rates, instead of actual costs, to compute the deductible cost of meals and snacks provided to eligible children. Irs freefile For these purposes: A family daycare provider is a person engaged in the business of providing family daycare. Irs freefile Family daycare is childcare provided to eligible children in the home of the family daycare provider. Irs freefile The care must be non-medical, not involve a transfer of legal custody, and generally last less than 24 hours each day. Irs freefile Eligible children are minor children receiving family daycare in the home of the family daycare provider. Irs freefile Eligible children do not include children who are full-time or part-time residents in the home where the childcare is provided or children whose parents or guardians are residents of the same home. Irs freefile Eligible children do not include children who receive daycare services for personal reasons of the provider. Irs freefile For example, if a provider provides daycare services for a relative as a favor to that relative, that child is not an eligible child. Irs freefile   You can compute the deductible cost of each meal and snack you actually purchased and served to an eligible child during the time period you provided family daycare using the standard meal and snack rates shown in Table 3, later. Irs freefile You can use the standard meal and snack rates for a maximum of one breakfast, one lunch, one dinner, and three snacks per eligible child per day. Irs freefile If you receive reimbursement for a particular meal or snack, you can deduct only the portion of the applicable standard meal or snack rate that is more than the amount of the reimbursement. Irs freefile   You can use either the standard meal and snack rates or actual costs to calculate the deductible cost of food provided to eligible children in the family daycare for any particular tax year. Irs freefile If you choose to use the standard meal and snack rates for a particular tax year, you must use the rates for all your deductible food costs for eligible children during that tax year. Irs freefile However, if you use the standard meal and snack rates in any tax year, you can use actual costs to compute the deductible cost of food in any other tax year. Irs freefile   If you use the standard meal and snack rates, you must maintain records to substantiate the computation of the total amount deducted for the cost of food provided to eligible children. Irs freefile The records kept should include the name of each child, dates and hours of attendance in the daycare, and the type and quantity of meals and snacks served. Irs freefile This information can be recorded in a log similar to the one shown in Exhibit A, near the end of this publication. Irs freefile   The standard meal and snack rates include beverages, but do not include non-food supplies used for food preparation, service, or storage, such as containers, paper products, or utensils. Irs freefile These expenses can be claimed as a separate deduction on your Schedule C (Form 1040). Irs freefile     Table 3. Irs freefile Standard Meal and Snack Rates1 Location of Family Daycare Provider Breakfast Lunch Dinner Snack States other than Alaska an