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Taxact 2011 Free Edition

How To File 2010 Taxes In 2013Free 1040ez1040eztaxformHow To File 2012 Tax Return LateIrs 1040x Form InstructionsWww Irs Gov Free FileForms To File 2011 TaxesCan You File 2012 And 2013 Taxes TogetherIrs Gov Forms 1040xEfile 2011 TaxFree 2010 State Tax Filing2010 Tax Form2012 Form 1040xH&r Block Amended Return 2012How To Complete 1040xCompare State Income Taxes2010 Federal Tax ReturnFree File 2011 TaxesAmmended Tax ReturnFree Tax Filing For College StudentsState Tax Form 2013Do Military Pay State Taxes1040ez OnlineWww Irs Gov FormspubsFederal Form 1040xAmend A Tax Return 20111040nr Filing OnlineIrs Ez FileAmended 2012 Tax Form1040ez Form PrintableFree Turbo Tax For Low IncomeAarp Tax AidFederal Ez Tax Form 2012Taxact 1040nr2009 Tax Returns OnlineFind State Tax ReturnHow To File An Amendment For TaxesIrs 1040ez 2013Form 1040ezAmend 2011 Tax Return

Taxact 2011 Free Edition

Taxact 2011 free edition Index A Alien Resident, Resident alien. Taxact 2011 free edition American Institute in Taiwan, U. Taxact 2011 free edition S. Taxact 2011 free edition employees of, American Institute in Taiwan. Taxact 2011 free edition American Samoa, possession exclusion, American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands Apprentices, treaty benefits for, Common Benefits Assistance (see Tax help) B Binational social security agreements, Bilateral Social Security (Totalization) Agreements Blocked income, Blocked Income Bona fide residence test Defined, Bona Fide Residence Test First year, Bona fide resident for part of a year. Taxact 2011 free edition Last year, Bona fide resident for part of a year. Taxact 2011 free edition Meeting the requirements, Publication 54 - Additional Material Qualifying for, Bona fide residence. Taxact 2011 free edition , Reassignment. Taxact 2011 free edition Treaty provisions, Special agreements and treaties. Taxact 2011 free edition Voting by absentee ballot, Effect of voting by absentee ballot. Taxact 2011 free edition Waiver of time requirements, Waiver of Time Requirements, U. Taxact 2011 free edition S. Taxact 2011 free edition Travel Restrictions C Camps, foreign, Foreign camps. Taxact 2011 free edition Carryover of housing deduction, Carryover. Taxact 2011 free edition Change of address, Reminders Choosing the exclusion, Choosing the Exclusion, When You Can Choose the Exclusion Clergy, self-employment tax on, Members of the Clergy Community income, Community income. Taxact 2011 free edition Competent authority assistance, Competent Authority Assistance Contributions To foreign charitable organizations, Contributions to Foreign Charitable Organizations To IRAs, Contributions to Individual Retirement Arrangements Conventions, income tax, Purpose of Tax Treaties Credit Earned income, Earned income credit. Taxact 2011 free edition , Earned income credit. Taxact 2011 free edition Foreign tax, Foreign tax credit. Taxact 2011 free edition , Taxes of Foreign Countries and U. Taxact 2011 free edition S. Taxact 2011 free edition Possessions, Deduction for Other Foreign Taxes, Common Benefits Related to excluded income, Items Related to Excluded Income Currency Foreign, Foreign Currency D Deductions Contributions to foreign charitable organizations, Contributions to Foreign Charitable Organizations Foreign taxes, Taxes of Foreign Countries and U. Taxact 2011 free edition S. Taxact 2011 free edition Possessions, Deduction for Other Foreign Taxes, Common Benefits, Publication 54 - Additional Material Housing, foreign, Foreign Housing Deduction IRA contributions, Contributions to Individual Retirement Arrangements Moving expenses, Moving Expenses, Forms To File Related to excluded income, Items Related to Excluded Income Reporting, How To Report Deductions Dependents Exemption for, Exemptions, Publication 54 - Additional Material Individual taxpayer identification number (ITIN), Social security number. Taxact 2011 free edition Social security number, Social security number. Taxact 2011 free edition Deposit of foreign currency with disbursing officer, Deposit of foreign currency with disbursing officer. Taxact 2011 free edition E Earned income Foreign, Foreign Earned Income, Foreign camps. Taxact 2011 free edition , Publication 54 - Additional Material Source of, Source of Earned Income Types of, Earned and Unearned Income, Storage expense reimbursements. Taxact 2011 free edition Earned income credit, Earned income credit. Taxact 2011 free edition , Earned income credit. Taxact 2011 free edition Employer-provided amounts, Employer-provided amounts. Taxact 2011 free edition Estimated tax, Estimated Tax Exclusion Foreign earned income, Foreign Earned Income Exclusion, When You Can Choose the Exclusion Housing, Foreign Housing Exclusion, Choosing the exclusion. Taxact 2011 free edition Meals and lodging, Exclusion of Meals and Lodging U. Taxact 2011 free edition S. Taxact 2011 free edition possessions, American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands Exemptions Dependents, Exemptions, Publication 54 - Additional Material Spouse, Exemptions, Publication 54 - Additional Material Extensions Filing income tax return, Extensions, Return filed before test is met. Taxact 2011 free edition Meeting bona fide residence or physical presence test, Extension of time to meet tests. Taxact 2011 free edition F Fellowships, Scholarships and fellowships. Taxact 2011 free edition Figuring estimated tax on nonconvertible foreign income, Figuring estimated tax on nonconvertible foreign currency. Taxact 2011 free edition Figuring U. Taxact 2011 free edition S. Taxact 2011 free edition income tax, Figuring actual tax. Taxact 2011 free edition Filing information Estimated tax, Estimated Tax Filing requirements, Filing Requirements Nonresident spouse treated as resident, Nonresident Alien Spouse Treated as a Resident, Foreign earned income exclusion. Taxact 2011 free edition Filing requirements By filing status, Filing Requirements Foreign currency, Foreign Currency When to file and pay, When To File and Pay, Return filed before test is met. Taxact 2011 free edition , Publication 54 - Additional Material Where to file, Where To File, Publication 54 - Additional Material Foreign Camps, Foreign camps. Taxact 2011 free edition Country, defined, Foreign Country Currency, Foreign Currency Earned income, Foreign Earned Income, Foreign camps. Taxact 2011 free edition , Publication 54 - Additional Material Household, second, Second foreign household. Taxact 2011 free edition Foreign currency, deposit with disbursing officer, Deposit of foreign currency with disbursing officer. Taxact 2011 free edition Foreign earned income Defined, Foreign Earned Income, More information. Taxact 2011 free edition U. Taxact 2011 free edition S. Taxact 2011 free edition Government employees, U. Taxact 2011 free edition S. Taxact 2011 free edition Government Employees, More information. Taxact 2011 free edition Foreign earned income exclusion Choosing, Choosing the Exclusion, When You Can Choose the Exclusion Defined, Foreign Earned Income Exclusion Earned income credit, Earned income credit. Taxact 2011 free edition Foreign tax credit, Foreign tax credit or deduction. Taxact 2011 free edition Income received after year earned, Paid in year following work. Taxact 2011 free edition , Example. Taxact 2011 free edition Limit, Limit on Excludable Amount, Physical presence test. Taxact 2011 free edition , Publication 54 - Additional Material Maximum exclusion, Limit on Excludable Amount, Physical presence test. Taxact 2011 free edition Part-year exclusion, Part-year exclusion. Taxact 2011 free edition Physical presence test, maximum exclusion, Physical presence test. Taxact 2011 free edition Requirements, Who Qualifies for the Exclusions and the Deduction?, Foreign camps. Taxact 2011 free edition Revoking choice, Revoking the Exclusion Foreign housing exclusion Earned income credit, Earned income credit. Taxact 2011 free edition Foreign tax credit, Foreign tax credit or deduction. Taxact 2011 free edition Foreign housing exclusion/deduction Carryover of deduction, Carryover. Taxact 2011 free edition Deduction, figuring, Foreign Housing Deduction Exclusion, figuring, Foreign Housing Exclusion, Choosing the exclusion. Taxact 2011 free edition Housing amount, Housing Amount Housing expenses, Housing expenses. Taxact 2011 free edition Married couples, Married Couples Requirements, Who Qualifies for the Exclusions and the Deduction?, Foreign camps. Taxact 2011 free edition Second foreign household, Second foreign household. Taxact 2011 free edition Foreign tax credit Earned income exclusion, Foreign tax credit or deduction. Taxact 2011 free edition , Foreign tax credit or deduction. Taxact 2011 free edition Foreign taxes Credit for, Foreign tax credit. Taxact 2011 free edition , Taxes of Foreign Countries and U. Taxact 2011 free edition S. Taxact 2011 free edition Possessions, Deduction for Other Foreign Taxes, Common Benefits Deduction for, Taxes of Foreign Countries and U. Taxact 2011 free edition S. Taxact 2011 free edition Possessions, Deduction for Other Foreign Taxes, Common Benefits, Publication 54 - Additional Material Paid on excluded income, Foreign taxes paid on excluded income. Taxact 2011 free edition Form 1040-ES, Estimated Tax 1040X, Return filed before test is met. Taxact 2011 free edition , How To Make the Choice 1116, Credit for Foreign Income Taxes 2032, Foreign affiliate. Taxact 2011 free edition 2350, How to get an extension. Taxact 2011 free edition 2555, Choosing the Exclusion, Form 2555 and Form 2555-EZ, Form 2555 2555-EZ, Choosing the Exclusion, Form 2555 and Form 2555-EZ, Form 2555 3115, Blocked Income 3903, Forms To File 4361, Members of the Clergy 4563, American Samoa. Taxact 2011 free edition 4868, Automatic 6-month extension. Taxact 2011 free edition 673, Statement. Taxact 2011 free edition 8689, Non-USVI resident with USVI income. Taxact 2011 free edition 8822, Reminders W-4, Foreign tax credit. Taxact 2011 free edition Free tax services, Free help with your tax return. Taxact 2011 free edition Frequently asked questions (FAQs), Publication 54 - Additional Material Fulbright grant, Fulbright Grant, Publication 54 - Additional Material G General tax questions, Publication 54 - Additional Material Green card test, Resident alien. Taxact 2011 free edition Guam Possession exclusion, American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands Residents of, Resident of Guam. Taxact 2011 free edition Where to file, Resident of Guam. Taxact 2011 free edition H Help (see Tax help) Housing Amount, Housing Amount, Self-employed and employer-provided amounts. Taxact 2011 free edition Deduction, Foreign Housing Exclusion and Deduction, Foreign Housing Deduction Exclusion, Foreign Housing Exclusion and Deduction, Choosing the exclusion. Taxact 2011 free edition Expenses, Housing expenses. Taxact 2011 free edition I Income Apprentices, treaty benefits for, Common Benefits Artist, Income of an artist. Taxact 2011 free edition Blocked, Blocked Income Community, Community income. Taxact 2011 free edition Corporation, Income from a corporation. Taxact 2011 free edition Earned, Foreign Earned Income, Foreign camps. Taxact 2011 free edition , Publication 54 - Additional Material Employer's property or facilities, use of, Use of employer's property or facilities. Taxact 2011 free edition Investment, treaty benefits for, Common Benefits Partnership, Income from a sole proprietorship or partnership. Taxact 2011 free edition Pensions and annuities, Pensions and annuities. Taxact 2011 free edition , Common Benefits Personal service, treaty benefits for, Common Benefits Professional fees, Professional fees. Taxact 2011 free edition Professors, treaty benefits for, Common Benefits Railroad retirement benefits, Publication 54 - Additional Material Reimbursement of employee expenses, Reimbursement of employee expenses. Taxact 2011 free edition Reimbursement of moving expenses, Reimbursement of moving expenses. Taxact 2011 free edition Rental, Rental income. Taxact 2011 free edition Royalties, Royalties. Taxact 2011 free edition Social security benefits, Publication 54 - Additional Material Sole proprietorship, Income from a sole proprietorship or partnership. Taxact 2011 free edition Source of, Source of Earned Income Stock options, Stock options. Taxact 2011 free edition Students, treaty benefits for, Common Benefits Teachers, treaty benefits for, Common Benefits Trainees, treaty benefits for, Common Benefits Unearned, Earned and Unearned Income Indefinite assignment, Temporary or Indefinite Assignment Individual retirement arrangements (IRAs), Contributions to Individual Retirement Arrangements Individual taxpayer identification number (ITIN), Social security number. Taxact 2011 free edition Investment income, treaty benefits for, Common Benefits IRAs, Contributions to Individual Retirement Arrangements L Limit on Foreign housing deduction, Limit Housing expenses, Limit on housing expenses. Taxact 2011 free edition Income exclusion, Limit on Excludable Amount, Physical presence test. Taxact 2011 free edition Lodging, exclusion of, Exclusion of Meals and Lodging M Married couples, Married Couples Meals and lodging, exclusion of, Exclusion of Meals and Lodging Moving Allocating expenses, Allocation of Moving Expenses Deducting expenses, Moving Expenses, Forms To File Reimbursement of expenses, Reimbursement of moving expenses. Taxact 2011 free edition N Nonresident spouse Social security number, Social Security Number (SSN) Treated as resident, Nonresident Alien Spouse Treated as a Resident, Foreign earned income exclusion. Taxact 2011 free edition Northern Mariana Islands Possession exclusion, American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands Residents of, Resident of the Commonwealth of the Northern Mariana Islands. Taxact 2011 free edition Where to file, Resident of the Commonwealth of the Northern Mariana Islands. Taxact 2011 free edition P Part-year exclusion, Part-year exclusion. Taxact 2011 free edition Pay for personal services, Earned income. Taxact 2011 free edition , Common Benefits Paying U. Taxact 2011 free edition S. Taxact 2011 free edition tax in foreign currency, Paying U. Taxact 2011 free edition S. Taxact 2011 free edition tax in foreign currency. Taxact 2011 free edition Payment of tax, When To File and Pay Penalties and interest, Publication 54 - Additional Material Pensions and annuities Income from, Pensions and annuities. Taxact 2011 free edition , Common Benefits Withholding from, Withholding from pension payments. Taxact 2011 free edition Physical presence test 12-month period, How to figure the 12-month period. Taxact 2011 free edition Defined, Physical Presence Test Maximum exclusion, Physical presence test. Taxact 2011 free edition Meeting the requirements, Publication 54 - Additional Material Waiver of time requirements, Waiver of Time Requirements, U. Taxact 2011 free edition S. Taxact 2011 free edition Travel Restrictions Professors, treaty benefits for, Common Benefits Publications (see Tax help) Puerto Rico Possession exclusion, Puerto Rico and U. Taxact 2011 free edition S. Taxact 2011 free edition Virgin Islands Residents of, Puerto Rico. Taxact 2011 free edition Q Questions and answers, Publication 54 - Additional Material R Railroad retirement benefits, Publication 54 - Additional Material Reimbursement Accountable plan, Accountable plan. Taxact 2011 free edition Employee expenses, Reimbursement of employee expenses. Taxact 2011 free edition Moving expenses, Reimbursement of moving expenses. Taxact 2011 free edition Resident alien defined, Resident alien. Taxact 2011 free edition Revoking choice to exclude, Revoking the Exclusion S Scholarship and fellowship grants, Publication 54 - Additional Material Scholarships, Scholarships and fellowships. Taxact 2011 free edition Second foreign household, Second foreign household. Taxact 2011 free edition , Married Couples Self-employment tax Clergy, Members of the Clergy Exemption from, Exemption From Social Security and Medicare Taxes How to pay, Publication 54 - Additional Material Who must pay, Who Must Pay Self-Employment Tax? Social security and Medicare taxes, Social Security and Medicare Taxes Social security benefits, Publication 54 - Additional Material Social security number Dependents, Social security number. Taxact 2011 free edition Nonresident spouse, Social Security Number (SSN) Source of earned income, Source of Earned Income Spouse, exemption for, Exemptions, Publication 54 - Additional Material Students, treaty benefits for, Common Benefits Substantial presence test, Resident alien. Taxact 2011 free edition T Taiwan, American Institute in, American Institute in Taiwan. Taxact 2011 free edition Tax help, How To Get Tax Help Tax home, Tax Home in Foreign Country, Temporary or Indefinite Assignment Tax treaties Benefits of, Common Benefits, More information on treaties. Taxact 2011 free edition Competent authority assistance, Competent Authority Assistance Determining residence, Special agreements and treaties. Taxact 2011 free edition Obtaining copies of, Obtaining Copies of Tax Treaties Purpose of, Purpose of Tax Treaties Teachers, treaty benefits for, Common Benefits Temporary assignment, expenses, Temporary or Indefinite Assignment Totalization agreements, Bilateral Social Security (Totalization) Agreements Trainees, treaty benefits for, Common Benefits Travel restrictions, U. Taxact 2011 free edition S. Taxact 2011 free edition Travel Restrictions Treaties (see Tax treaties) TTY/TDD information, How To Get Tax Help U U. Taxact 2011 free edition S. Taxact 2011 free edition Government employees, U. Taxact 2011 free edition S. Taxact 2011 free edition Government Employees, More information. Taxact 2011 free edition U. Taxact 2011 free edition S. Taxact 2011 free edition Virgin Islands Possession exclusion, Puerto Rico and U. Taxact 2011 free edition S. Taxact 2011 free edition Virgin Islands V Virgin Islands Nonresidents of, Non-USVI resident with USVI income. Taxact 2011 free edition Residents of, Resident of U. Taxact 2011 free edition S. Taxact 2011 free edition Virgin Islands (USVI). Taxact 2011 free edition Where to file, Resident of U. Taxact 2011 free edition S. Taxact 2011 free edition Virgin Islands (USVI). Taxact 2011 free edition W Waiver of time requirements, Waiver of Time Requirements, U. Taxact 2011 free edition S. Taxact 2011 free edition Travel Restrictions When to file and pay, When To File and Pay, Return filed before test is met. Taxact 2011 free edition , Publication 54 - Additional Material Where to file Claiming exclusion/deduction, Where To File Commonwealth of the Northern Mariana Islands residents, Resident of the Commonwealth of the Northern Mariana Islands. Taxact 2011 free edition Guam residents, Resident of Guam. Taxact 2011 free edition No legal residence in U. Taxact 2011 free edition S. Taxact 2011 free edition , Where To File Virgin Islands residents, nonresidents, Resident of U. Taxact 2011 free edition S. Taxact 2011 free edition Virgin Islands (USVI). Taxact 2011 free edition Withholding Income tax, Income Tax Withholding , Publication 54 - Additional Material Pension payments, Withholding from pension payments. Taxact 2011 free edition Prev  Up     Home   More Online Publications
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The Taxact 2011 Free Edition

Taxact 2011 free edition 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. Taxact 2011 free edition 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. Taxact 2011 free edition However, you may be able to deduct expenses related to the business use of part of your home if you meet specific requirements. Taxact 2011 free edition Even then, the deductible amount of these types of expenses may be limited. Taxact 2011 free edition Use this section and Figure A, later, to decide if you can deduct expenses for the business use of your home. Taxact 2011 free edition 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). Taxact 2011 free edition Additional tests for employee use. Taxact 2011 free edition   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. Taxact 2011 free edition 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. Taxact 2011 free edition If the use of the home office is merely appropriate and helpful, you cannot deduct expenses for the business use of your home. Taxact 2011 free edition Exclusive Use To qualify under the exclusive use test, you must use a specific area of your home only for your trade or business. Taxact 2011 free edition The area used for business can be a room or other separately identifiable space. Taxact 2011 free edition The space does not need to be marked off by a permanent partition. Taxact 2011 free edition 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. Taxact 2011 free edition Example. Taxact 2011 free edition You are an attorney and use a den in your home to write legal briefs and prepare clients' tax returns. Taxact 2011 free edition Your family also uses the den for recreation. Taxact 2011 free edition The den is not used exclusively in your trade or business, so you cannot claim a deduction for the business use of the den. Taxact 2011 free edition Exceptions to Exclusive Use You do not have to meet the exclusive use test if either of the following applies. Taxact 2011 free edition You use part of your home for the storage of inventory or product samples (discussed next). Taxact 2011 free edition You use part of your home as a daycare facility, discussed later under Daycare Facility . Taxact 2011 free edition Note. Taxact 2011 free edition With the exception of these two uses, any portion of the home used for business purposes must meet the exclusive use test. Taxact 2011 free edition Storage of inventory or product samples. Taxact 2011 free edition    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. Taxact 2011 free edition However, you must meet all the following tests. Taxact 2011 free edition You sell products at wholesale or retail as your trade or business. Taxact 2011 free edition You keep the inventory or product samples in your home for use in your trade or business. Taxact 2011 free edition Your home is the only fixed location of your trade or business. Taxact 2011 free edition You use the storage space on a regular basis. Taxact 2011 free edition The space you use is a separately identifiable space suitable for storage. Taxact 2011 free edition Example. Taxact 2011 free edition Your home is the only fixed location of your business of selling mechanics' tools at retail. Taxact 2011 free edition You regularly use half of your basement for storage of inventory and product samples. Taxact 2011 free edition You sometimes use the area for personal purposes. Taxact 2011 free edition The expenses for the storage space are deductible even though you do not use this part of your basement exclusively for business. Taxact 2011 free edition Regular Use To qualify under the regular use test, you must use a specific area of your home for business on a regular basis. Taxact 2011 free edition Incidental or occasional business use is not regular use. Taxact 2011 free edition You must consider all facts and circumstances in determining whether your use is on a regular basis. Taxact 2011 free edition 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. Taxact 2011 free edition 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. Taxact 2011 free edition Example. Taxact 2011 free edition 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. Taxact 2011 free edition You do not make investments as a broker or dealer. Taxact 2011 free edition So, your activities are not part of a trade or business and you cannot take a deduction for the business use of your home. Taxact 2011 free edition Principal Place of Business You can have more than one business location, including your home, for a single trade or business. Taxact 2011 free edition 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. Taxact 2011 free edition 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. Taxact 2011 free edition Your home office will qualify as your principal place of business if you meet the following requirements. Taxact 2011 free edition You use it exclusively and regularly for administrative or management activities of your trade or business. Taxact 2011 free edition You have no other fixed location where you conduct substantial administrative or management activities of your trade or business. Taxact 2011 free edition If, after considering your business locations, your home cannot be identified as your principal place of business, you cannot deduct home office expenses. Taxact 2011 free edition 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. Taxact 2011 free edition Administrative or management activities. Taxact 2011 free edition   There are many activities that are administrative or managerial in nature. Taxact 2011 free edition The following are a few examples. Taxact 2011 free edition Billing customers, clients, or patients. Taxact 2011 free edition Keeping books and records. Taxact 2011 free edition Ordering supplies. Taxact 2011 free edition Setting up appointments. Taxact 2011 free edition Forwarding orders or writing reports. Taxact 2011 free edition Administrative or management activities performed at other locations. Taxact 2011 free edition   The following activities performed by you or others will not disqualify your home office from being your principal place of business. Taxact 2011 free edition You have others conduct your administrative or management activities at locations other than your home. Taxact 2011 free edition (For example, another company does your billing from its place of business. Taxact 2011 free edition ) 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. Taxact 2011 free edition You occasionally conduct minimal administrative or management activities at a fixed location outside your home. Taxact 2011 free edition You conduct substantial nonadministrative or nonmanagement business activities at a fixed location outside your home. Taxact 2011 free edition (For example, you meet with or provide services to customers, clients, or patients at a fixed location of the business outside your home. Taxact 2011 free edition ) You have suitable space to conduct administrative or management activities outside your home, but choose to use your home office for those activities instead. Taxact 2011 free edition Please click here for the text description of the image. Taxact 2011 free edition Can you deduct business use of the home expenses? Example 1. Taxact 2011 free edition John is a self-employed plumber. Taxact 2011 free edition Most of John's time is spent at customers' homes and offices installing and repairing plumbing. Taxact 2011 free edition 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. Taxact 2011 free edition John writes up estimates and records of work completed at his customers' premises. Taxact 2011 free edition He does not conduct any substantial administrative or management activities at any fixed location other than his home office. Taxact 2011 free edition John does not do his own billing. Taxact 2011 free edition He uses a local bookkeeping service to bill his customers. Taxact 2011 free edition John's home office qualifies as his principal place of business for deducting expenses for its use. Taxact 2011 free edition 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. Taxact 2011 free edition His choice to have his billing done by another company does not disqualify his home office from being his principal place of business. Taxact 2011 free edition 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. Taxact 2011 free edition Example 2. Taxact 2011 free edition Pamela is a self-employed sales representative for several different product lines. Taxact 2011 free edition 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. Taxact 2011 free edition She occasionally writes up orders and sets up appointments from her hotel room when she is away on business overnight. Taxact 2011 free edition Pamela's business is selling products to customers at various locations throughout her territory. Taxact 2011 free edition To make these sales, she regularly visits customers to explain the available products and take orders. Taxact 2011 free edition Pamela's home office qualifies as her principal place of business for deducting expenses for its use. Taxact 2011 free edition She conducts administrative or management activities there and she has no other fixed location where she conducts substantial administrative or management activities. Taxact 2011 free edition 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. Taxact 2011 free edition 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. Taxact 2011 free edition Example 3. Taxact 2011 free edition Paul is a self-employed anesthesiologist. Taxact 2011 free edition He spends the majority of his time administering anesthesia and postoperative care in three local hospitals. Taxact 2011 free edition One of the hospitals provides him with a small shared office where he could conduct administrative or management activities. Taxact 2011 free edition Paul very rarely uses the office the hospital provides. Taxact 2011 free edition He uses a room in his home that he has converted to an office. Taxact 2011 free edition He uses this room exclusively and regularly to conduct all the following activities. Taxact 2011 free edition Contacting patients, surgeons, and hospitals regarding scheduling. Taxact 2011 free edition Preparing for treatments and presentations. Taxact 2011 free edition Maintaining billing records and patient logs. Taxact 2011 free edition Satisfying continuing medical education requirements. Taxact 2011 free edition Reading medical journals and books. Taxact 2011 free edition Paul's home office qualifies as his principal place of business for deducting expenses for its use. Taxact 2011 free edition 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. Taxact 2011 free edition 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. Taxact 2011 free edition 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. Taxact 2011 free edition 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. Taxact 2011 free edition Example 4. Taxact 2011 free edition Kathleen is employed as a teacher. Taxact 2011 free edition She is required to teach and meet with students at the school and to grade papers and tests. Taxact 2011 free edition 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. Taxact 2011 free edition The school does not require her to work at home. Taxact 2011 free edition Kathleen prefers to use the office she has set up in her home and does not use the one provided by the school. Taxact 2011 free edition She uses this home office exclusively and regularly for the administrative duties of her teaching job. Taxact 2011 free edition 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. Taxact 2011 free edition 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. Taxact 2011 free edition More Than One Trade or Business The same home office can be the principal place of business for two or more separate business activities. Taxact 2011 free edition 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. Taxact 2011 free edition You must use the home office exclusively and regularly for one or more of the following purposes. Taxact 2011 free edition As the principal place of business for one or more of your trades or businesses. Taxact 2011 free edition 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. Taxact 2011 free edition If your home office is a separate structure, in connection with one or more of your trades or businesses. Taxact 2011 free edition You can use your home office for more than one business activity, but you cannot use it for any nonbusiness (i. Taxact 2011 free edition e. Taxact 2011 free edition , personal) activities. Taxact 2011 free edition If you are an employee, any use of the home office in connection with your employment must be for the convenience of your employer. Taxact 2011 free edition See Rental to employer , later, if you rent part of your home to your employer. Taxact 2011 free edition Example. Taxact 2011 free edition Tracy White is employed as a teacher. Taxact 2011 free edition Her principal place of work is the school, which provides her office space to do her school work. Taxact 2011 free edition She also has a mail order jewelry business. Taxact 2011 free edition All her work in the jewelry business is done in her home office and the office is used exclusively for that business. Taxact 2011 free edition If she meets all the other tests, she can deduct expenses for the business use of her home for the jewelry business. Taxact 2011 free edition 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. Taxact 2011 free edition As an employee, Tracy must also meet the convenience-of-the-employer test to qualify for the deduction. Taxact 2011 free edition 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. Taxact 2011 free edition 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. Taxact 2011 free edition You physically meet with patients, clients, or customers on your premises. Taxact 2011 free edition Their use of your home is substantial and integral to the conduct of your business. Taxact 2011 free edition Doctors, dentists, attorneys, and other professionals who maintain offices in their homes generally will meet this requirement. Taxact 2011 free edition Using your home for occasional meetings and telephone calls will not qualify you to deduct expenses for the business use of your home. Taxact 2011 free edition 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. Taxact 2011 free edition Example. Taxact 2011 free edition June Quill, a self-employed attorney, works 3 days a week in her city office. Taxact 2011 free edition She works 2 days a week in her home office used only for business. Taxact 2011 free edition She regularly meets clients there. Taxact 2011 free edition Her home office qualifies for a business deduction because she meets clients there in the normal course of her business. Taxact 2011 free edition 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. Taxact 2011 free edition The structure does not have to be your principal place of business or a place where you meet patients, clients, or customers. Taxact 2011 free edition Example. Taxact 2011 free edition John Berry operates a floral shop in town. Taxact 2011 free edition He grows the plants for his shop in a greenhouse behind his home. Taxact 2011 free edition 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. Taxact 2011 free edition 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. Taxact 2011 free edition 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. Taxact 2011 free edition Electing to use the simplified method. Taxact 2011 free edition   The simplified method is an alternative to the calculation, allocation, and substantiation of actual expenses. Taxact 2011 free edition You choose whether or not to figure your deduction using the simplified method each taxable year. Taxact 2011 free edition See Using the Simplified Method , later. Taxact 2011 free edition Rental to employer. Taxact 2011 free edition   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. Taxact 2011 free edition You can deduct mortgage interest, qualified mortgage insurance premiums, real estate taxes, and personal casualty losses for the rented part, subject to any limitations. Taxact 2011 free edition 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. Taxact 2011 free edition 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. Taxact 2011 free edition You will also need to figure the percentage of your home used for business and the limit on the deduction. Taxact 2011 free edition 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. Taxact 2011 free edition 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. Taxact 2011 free edition Part-year use. Taxact 2011 free edition   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. Taxact 2011 free edition 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. Taxact 2011 free edition Expenses related to tax-exempt income. Taxact 2011 free edition   Generally, you cannot deduct expenses that are related to tax-exempt allowances. Taxact 2011 free edition 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. Taxact 2011 free edition No deduction is allowed for other expenses related to the tax-exempt allowance. Taxact 2011 free edition   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. Taxact 2011 free edition Actual Expenses You must divide the expenses of operating your home between personal and business use. Taxact 2011 free edition The part of a home operating expense you can use to figure your deduction depends on both of the following. Taxact 2011 free edition Whether the expense is direct, indirect, or unrelated. Taxact 2011 free edition The percentage of your home used for business. Taxact 2011 free edition Table 1, next, describes the types of expenses you may have and the extent to which they are deductible. Taxact 2011 free edition Table 1. Taxact 2011 free edition Types of Expenses  Expense  Description  Deductibility Direct Expenses only for  the business part  of your home. Taxact 2011 free edition Deductible in full. Taxact 2011 free edition *   Examples:  Painting or repairs  only in the area  used for business. Taxact 2011 free edition Exception: May be only partially  deductible in a daycare facility. Taxact 2011 free edition See Daycare Facility , later. Taxact 2011 free edition Indirect Expenses for  keeping up and running your  entire home. Taxact 2011 free edition Deductible based on the percentage of your home used for business. Taxact 2011 free edition *   Examples:  Insurance, utilities, and  general repairs. Taxact 2011 free edition   Unrelated Expenses only for  the parts of your  home not used  for business. Taxact 2011 free edition Not deductible. Taxact 2011 free edition   Examples:  Lawn care or painting  a room not used  for business. Taxact 2011 free edition   *Subject to the deduction limit, discussed later. Taxact 2011 free edition Form 8829 and the Worksheet To Figure the Deduction for Business Use of Your Home have separate columns for direct and indirect expenses. Taxact 2011 free edition Certain expenses are deductible whether or not you use your home for business. Taxact 2011 free edition 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. Taxact 2011 free edition These expenses include the following. Taxact 2011 free edition Real estate taxes. Taxact 2011 free edition Qualified mortgage insurance premiums. Taxact 2011 free edition Deductible mortgage interest. Taxact 2011 free edition Casualty losses. Taxact 2011 free edition Other expenses are deductible only if you use your home for business. Taxact 2011 free edition You can use the business percentage of these expenses to figure your total business use of the home deduction. Taxact 2011 free edition These expenses generally include (but are not limited to) the following. Taxact 2011 free edition Depreciation (covered under Depreciating Your Home , later). Taxact 2011 free edition Insurance. Taxact 2011 free edition Rent paid for the use of property you do not own but use in your trade or business. Taxact 2011 free edition Repairs. Taxact 2011 free edition Security system. Taxact 2011 free edition Utilities and services. Taxact 2011 free edition Real estate taxes. Taxact 2011 free edition   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. Taxact 2011 free edition   For more information on the deduction for real estate taxes, see Publication 530, Tax Information for Homeowners. Taxact 2011 free edition Deductible mortgage interest. Taxact 2011 free edition   To figure the business part of your deductible mortgage interest, multiply this interest by the percentage of your home used for business. Taxact 2011 free edition You can include interest on a second mortgage in this computation. Taxact 2011 free edition 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. Taxact 2011 free edition For more information on what interest is deductible, see Publication 936, Home Mortgage Interest Deduction. Taxact 2011 free edition Qualified mortgage insurance premiums. Taxact 2011 free edition   To figure the business part of your qualified mortgage insurance premiums, multiply the premiums by the percentage of your home used for business. Taxact 2011 free edition You can include premiums for insurance on a second mortgage in this computation. Taxact 2011 free edition 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. Taxact 2011 free edition For more information, see Publication 936, and Line 13 in the Instructions for Schedule A (Form 1040). Taxact 2011 free edition Casualty losses. Taxact 2011 free edition    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. Taxact 2011 free edition A direct expense is the loss on the portion of the property you use only in your business. Taxact 2011 free edition Use the entire loss to figure the business use of the home deduction. Taxact 2011 free edition An indirect expense is the loss on property you use for both business and personal purposes. Taxact 2011 free edition Use only the business portion to figure the deduction. Taxact 2011 free edition An unrelated expense is the loss on property you do not use in your business. Taxact 2011 free edition Do not use any of the loss to figure the deduction. Taxact 2011 free edition Example. Taxact 2011 free edition You meet the rules to take a deduction for an office in your home that is 10% of the total area of your house. Taxact 2011 free edition A storm damages your roof. Taxact 2011 free edition 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. Taxact 2011 free edition You would complete Form 4684, Casualties and Thefts, to report your loss. Taxact 2011 free edition 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. Taxact 2011 free edition 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. Taxact 2011 free edition 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. Taxact 2011 free edition Forms and worksheets to use. Taxact 2011 free edition   If you are filing Schedule C (Form 1040), get Form 8829 and follow the instructions for casualty losses. Taxact 2011 free edition 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. Taxact 2011 free edition You will also need to get Form 4684. Taxact 2011 free edition More information. Taxact 2011 free edition   For more information on casualty losses, see Publication 547, Casualties, Disasters, and Thefts. Taxact 2011 free edition Insurance. Taxact 2011 free edition   You can deduct the cost of insurance that covers the business part of your home. Taxact 2011 free edition 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. Taxact 2011 free edition You can deduct the business percentage of the part that applies to the following year in that year. Taxact 2011 free edition Rent. Taxact 2011 free edition   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. Taxact 2011 free edition To figure your deduction, multiply your rent payments by the percentage of your home used for business. Taxact 2011 free edition   If you own your home, you cannot deduct the fair rental value of your home. Taxact 2011 free edition However, see Depreciating Your Home , later. Taxact 2011 free edition Repairs. Taxact 2011 free edition   The cost of repairs that relate to your business, including labor (other than your own labor), is a deductible expense. Taxact 2011 free edition For example, a furnace repair benefits the entire home. Taxact 2011 free edition If you use 10% of your home for business, you can deduct 10% of the cost of the furnace repair. Taxact 2011 free edition   Repairs keep your home in good working order over its useful life. Taxact 2011 free edition Examples of common repairs are patching walls and floors, painting, wallpapering, repairing roofs and gutters, and mending leaks. Taxact 2011 free edition However, repairs are sometimes treated as a permanent improvement and are not deductible. Taxact 2011 free edition See Permanent improvements , later, under Depreciating Your Home. Taxact 2011 free edition Security system. Taxact 2011 free edition   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. Taxact 2011 free edition 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. Taxact 2011 free edition Utilities and services. Taxact 2011 free edition   Expenses for utilities and services, such as electricity, gas, trash removal, and cleaning services, are primarily personal expenses. Taxact 2011 free edition However, if you use part of your home for business, you can deduct the business part of these expenses. Taxact 2011 free edition Generally, the business percentage for utilities is the same as the percentage of your home used for business. Taxact 2011 free edition Telephone. Taxact 2011 free edition   The basic local telephone service charge, including taxes, for the first telephone line into your home (i. Taxact 2011 free edition e. Taxact 2011 free edition , landline) is a nondeductible personal expense. Taxact 2011 free edition 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. Taxact 2011 free edition Do not include these expenses as a cost of using your home for business. Taxact 2011 free edition Deduct these charges separately on the appropriate form or schedule. Taxact 2011 free edition 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). Taxact 2011 free edition Depreciating Your Home If you own your home and qualify to deduct expenses for its business use, you can claim a deduction for depreciation. Taxact 2011 free edition Depreciation is an allowance for the wear and tear on the part of your home used for business. Taxact 2011 free edition You cannot depreciate the cost or value of the land. Taxact 2011 free edition You recover its cost when you sell or otherwise dispose of the property. Taxact 2011 free edition Before you figure your depreciation deduction, you need to know the following information. Taxact 2011 free edition The month and year you started using your home for business. Taxact 2011 free edition The adjusted basis and fair market value of your home (excluding land) at the time you began using it for business. Taxact 2011 free edition The cost of any improvements before and after you began using the property for business. Taxact 2011 free edition The percentage of your home used for business. Taxact 2011 free edition See Business Percentage , later. Taxact 2011 free edition Adjusted basis defined. Taxact 2011 free edition   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. Taxact 2011 free edition For a discussion of adjusted basis, see Publication 551. Taxact 2011 free edition Permanent improvements. Taxact 2011 free edition   A permanent improvement increases the value of property, adds to its life, or gives it a new or different use. Taxact 2011 free edition Examples of improvements are replacing electric wiring or plumbing, adding a new roof or addition, paneling, or remodeling. Taxact 2011 free edition    You must carefully distinguish between repairs and improvements. Taxact 2011 free edition See Repairs , earlier, under Actual Expenses. Taxact 2011 free edition You also must keep accurate records of these expenses. Taxact 2011 free edition These records will help you decide whether an expense is a deductible or a capital (added to the basis) expense. Taxact 2011 free edition However, if you make repairs as part of an extensive remodeling or restoration of your home, the entire job is an improvement. Taxact 2011 free edition Example. Taxact 2011 free edition You buy an older home and fix up two rooms as a beauty salon. Taxact 2011 free edition 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. Taxact 2011 free edition Normally, the patching, painting, and floor work are repairs and the other expenses are permanent improvements. Taxact 2011 free edition 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. Taxact 2011 free edition You cannot deduct any portion of it as a repair expense. Taxact 2011 free edition Adjusting for depreciation deducted in earlier years. Taxact 2011 free edition   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. Taxact 2011 free edition 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. Taxact 2011 free edition If you did not deduct any depreciation, decrease the basis by the amount you could have deducted. Taxact 2011 free edition   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. Taxact 2011 free edition   If you deducted the incorrect amount of depreciation, see Publication 946. Taxact 2011 free edition Fair market value defined. Taxact 2011 free edition   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. Taxact 2011 free edition 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. Taxact 2011 free edition Figuring the depreciation deduction for the current year. Taxact 2011 free edition   If you began using your home for business before 2013, continue to use the same depreciation method you used in past tax years. Taxact 2011 free edition   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). Taxact 2011 free edition Under MACRS, nonresidential real property is depreciated using the straight line method over 39 years. Taxact 2011 free edition For more information on MACRS and other methods of depreciation, see Publication 946. Taxact 2011 free edition   To figure the depreciation deduction, you must first figure the part of the cost of your home that can be depreciated (depreciable basis). Taxact 2011 free edition The depreciable basis is figured by multiplying the percentage of your home used for business by the smaller of the following. Taxact 2011 free edition The adjusted basis of your home (excluding land) on the date you began using your home for business. Taxact 2011 free edition The fair market value of your home (excluding land) on the date you began using your home for business. Taxact 2011 free edition Depreciation table. Taxact 2011 free edition   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. Taxact 2011 free edition Table 2. Taxact 2011 free edition MACRS Percentage Table for 39-Year Nonresidential Real Property Month First Used for Business Percentage To Use 1 2. Taxact 2011 free edition 461% 2 2. Taxact 2011 free edition 247% 3 2. Taxact 2011 free edition 033% 4 1. Taxact 2011 free edition 819% 5 1. Taxact 2011 free edition 605% 6 1. Taxact 2011 free edition 391% 7 1. Taxact 2011 free edition 177% 8 0. Taxact 2011 free edition 963% 9 0. Taxact 2011 free edition 749% 10 0. Taxact 2011 free edition 535% 11 0. Taxact 2011 free edition 321% 12 0. Taxact 2011 free edition 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. Taxact 2011 free edition See Publication 946 for the percentages for the remaining tax years of the recovery period. Taxact 2011 free edition Example. Taxact 2011 free edition In May, George Miller began to use one room in his home exclusively and regularly to meet clients. Taxact 2011 free edition This room is 8% of the square footage of his home. Taxact 2011 free edition He bought the home in 2003 for $125,000. Taxact 2011 free edition He determined from his property tax records that his adjusted basis in the house (exclusive of land) is $115,000. Taxact 2011 free edition In May, the house had a fair market value of $165,000. Taxact 2011 free edition He multiplies his adjusted basis of $115,000 (which is less than the fair market value) by 8%. Taxact 2011 free edition The result is $9,200, his depreciable basis for the business part of the house. Taxact 2011 free edition George files his return based on the calendar year. Taxact 2011 free edition May is the 5th month of his tax year. Taxact 2011 free edition He multiplies his depreciable basis of $9,200 by 1. Taxact 2011 free edition 605% (. Taxact 2011 free edition 01605), the percentage from the table for the 5th month. Taxact 2011 free edition His depreciation deduction is $147. Taxact 2011 free edition 66. Taxact 2011 free edition Depreciating permanent improvements. Taxact 2011 free edition   Add the costs of permanent improvements made before you began using your home for business to the basis of your property. Taxact 2011 free edition Depreciate these costs as part of the cost of your home as explained earlier. Taxact 2011 free edition 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. Taxact 2011 free edition 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. Taxact 2011 free edition For improvements made this year, the recovery period is 39 years. Taxact 2011 free edition For the percentage to use for the first year, see Table 2, earlier. Taxact 2011 free edition For more information on recovery periods, see Publication 946. Taxact 2011 free edition 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. Taxact 2011 free edition Use the resulting percentage to figure the business part of the expenses for operating your entire home. Taxact 2011 free edition You can use any reasonable method to determine the business percentage. Taxact 2011 free edition The following are two commonly used methods for figuring the percentage. Taxact 2011 free edition Divide the area (length multiplied by the width) used for business by the total area of your home. Taxact 2011 free edition 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. Taxact 2011 free edition Example 1. Taxact 2011 free edition Your office is 240 square feet (12 feet × 20 feet). Taxact 2011 free edition Your home is 1,200 square feet. Taxact 2011 free edition Your office is 20% (240 ÷ 1,200) of the total area of your home. Taxact 2011 free edition Your business percentage is 20%. Taxact 2011 free edition Example 2. Taxact 2011 free edition You use one room in your home for business. Taxact 2011 free edition Your home has 10 rooms, all about equal size. Taxact 2011 free edition Your office is 10% (1 ÷ 10) of the total area of your home. Taxact 2011 free edition Your business percentage is 10%. Taxact 2011 free edition 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. Taxact 2011 free edition 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. Taxact 2011 free edition 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. Taxact 2011 free edition 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. Taxact 2011 free edition 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)). Taxact 2011 free edition These expenses are discussed in detail under Actual Expenses , earlier. Taxact 2011 free edition 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. Taxact 2011 free edition If you are self-employed, do not include in (2) above your deduction for one-half of your self-employment tax. Taxact 2011 free edition Carryover of unallowed expenses. Taxact 2011 free edition   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. Taxact 2011 free edition They are subject to the deduction limit for that year, whether or not you live in the same home during that year. Taxact 2011 free edition Figuring the deduction limit and carryover. Taxact 2011 free edition   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. Taxact 2011 free edition If you file Schedule C (Form 1040), figure your deduction limit and carryover on Form 8829. Taxact 2011 free edition Example. Taxact 2011 free edition You meet the requirements for deducting expenses for the business use of your home. Taxact 2011 free edition You use 20% of your home for business. Taxact 2011 free edition 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. Taxact 2011 free edition    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). Taxact 2011 free edition You also can deduct all of your business expenses not related to the use of your home ($2,000). Taxact 2011 free edition 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. Taxact 2011 free edition Your deduction for depreciation for the business use of your home is limited to $200 ($1,000 minus $800) because of the deduction limit. Taxact 2011 free edition You can carry over the $1,400 balance and add it to your depreciation for 2014, subject to your deduction limit in 2014. Taxact 2011 free edition More than one place of business. Taxact 2011 free edition   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. Taxact 2011 free edition 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. Taxact 2011 free edition 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. Taxact 2011 free edition For more information on transportation costs, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. Taxact 2011 free edition Using the Simplified Method The simplified method is an alternative to the calculation, allocation, and substantiation of actual expenses. Taxact 2011 free edition 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. Taxact 2011 free edition The area you use to figure your deduction is limited to 300 square feet. Taxact 2011 free edition See Simplified Amount , later, for information about figuring the amount of the deduction. Taxact 2011 free edition For more information about the simplified method, see Revenue Procedure 2013-13, 2013-06 I. Taxact 2011 free edition R. Taxact 2011 free edition B. Taxact 2011 free edition 478, available at www. Taxact 2011 free edition irs. Taxact 2011 free edition gov/irb/2013-06_IRB/ar09. Taxact 2011 free edition html. Taxact 2011 free edition Actual expenses and depreciation of your home. Taxact 2011 free edition   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. Taxact 2011 free edition 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. Taxact 2011 free edition The depreciation deduction allowable for that portion of the home is deemed to be zero for a year you use the simplified method. Taxact 2011 free edition 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. Taxact 2011 free edition More information. Taxact 2011 free edition   For more information about claiming depreciation in a subsequent year, see Revenue Procedure 2013-13, 2013-06 I. Taxact 2011 free edition R. Taxact 2011 free edition B. Taxact 2011 free edition 478, available at www. Taxact 2011 free edition irs. Taxact 2011 free edition gov/irb/2013-06_IRB/ar09. Taxact 2011 free edition html. Taxact 2011 free edition 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). Taxact 2011 free edition Expenses deductible without regard to business use. Taxact 2011 free edition   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. Taxact 2011 free edition These expenses include mortgage interest, real estate taxes, and casualty losses, subject to any limitations. Taxact 2011 free edition See Where To Deduct , later. Taxact 2011 free edition 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). Taxact 2011 free edition No deduction of carryover of actual expenses. Taxact 2011 free edition   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. Taxact 2011 free edition Instead, you will continue to carry over the disallowed amount to the next year that you use actual expenses to figure your deduction. Taxact 2011 free edition Electing the Simplified Method You choose whether or not to figure your deduction using the simplified method each taxable year. Taxact 2011 free edition 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. Taxact 2011 free edition An election for a taxable year, once made, is irrevocable. Taxact 2011 free edition 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. Taxact 2011 free edition Shared use. Taxact 2011 free edition   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. Taxact 2011 free edition More than one qualified business use. Taxact 2011 free edition   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. Taxact 2011 free edition More than one home. Taxact 2011 free edition   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. Taxact 2011 free edition You must figure the deduction for any other home using actual expenses. Taxact 2011 free edition 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. Taxact 2011 free edition 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. Taxact 2011 free edition The allowable area of your home used in conducting the business. Taxact 2011 free edition 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. Taxact 2011 free edition The gross income from the business use of your home. Taxact 2011 free edition The amount of the business expenses that are not related to the use of your home. Taxact 2011 free edition 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. Taxact 2011 free edition To figure the amount you can deduct for qualified business use of your home using the simplified method, follow these 3 steps. Taxact 2011 free edition 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). Taxact 2011 free edition See Allowable area and Space used regularly for daycare , later. Taxact 2011 free edition 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. Taxact 2011 free edition 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. Taxact 2011 free edition See Gross income limitation , later. Taxact 2011 free edition Take the smaller of the amounts from (1) and (2). Taxact 2011 free edition This is the amount you can deduct for this qualified business use of your home using the simplified method. Taxact 2011 free edition 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. Taxact 2011 free edition 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. Taxact 2011 free edition Allowable area. Taxact 2011 free edition   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. Taxact 2011 free edition 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. Taxact 2011 free edition 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. Taxact 2011 free edition Area used by a qualified joint venture. Taxact 2011 free edition   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. Taxact 2011 free edition Split the actual area used in conducting business between you and your spouse in the same manner you split your other tax attributes. Taxact 2011 free edition Then, each spouse will figure the allowable area separately. Taxact 2011 free edition For more information about qualified joint ventures, see Qualified Joint Venture in the Instructions for Schedule C. Taxact 2011 free edition Shared use. Taxact 2011 free edition   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. Taxact 2011 free edition You must allocate the shared space between you and the other person in a reasonable manner. Taxact 2011 free edition Example. Taxact 2011 free edition Kristin and Lindsey are roommates. Taxact 2011 free edition Kristin uses 300 square feet of their home for a qualified business use. Taxact 2011 free edition Lindsey uses 200 square feet of their home for a separate qualified business use. Taxact 2011 free edition The qualified business uses share 100 square feet. Taxact 2011 free edition 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. Taxact 2011 free edition If divided evenly, Kristin could claim 250 square feet using the simplified method and Lindsey could claim 150 square feet. Taxact 2011 free edition More than one qualified business use. Taxact 2011 free edition   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. Taxact 2011 free edition Allocate the actual square footage used (up to the maximum of 300 square feet) among your qualified business uses in a reasonable manner. Taxact 2011 free edition However, do not allocate more square feet to a qualified business use than you actually use for that business. Taxact 2011 free edition Rental use. Taxact 2011 free edition   The simplified method does not apply to rental use. Taxact 2011 free edition A rental use that qualifies for the deduction must be figured using actual expenses. Taxact 2011 free edition 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. Taxact 2011 free edition 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. Taxact 2011 free edition Part-year use or area changes. Taxact 2011 free edition   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. Taxact 2011 free edition 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. Taxact 2011 free edition When determining the average monthly allowable square footage, you cannot take more than 300 square feet into account for any one month. Taxact 2011 free edition Additionally, if your qualified business use was less than 15 days in a month, you must use -0- for that month. Taxact 2011 free edition Example 1. Taxact 2011 free edition Andy files his federal income tax return on a calendar year basis. Taxact 2011 free edition On July 20, he began using 420 square feet of his home for a qualified business use. Taxact 2011 free edition He continued to use the 420 square feet until the end of the year. Taxact 2011 free edition 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). Taxact 2011 free edition Example 2. Taxact 2011 free edition Amy files her federal income tax return on a calendar year basis. Taxact 2011 free edition On April 20, she began using 100 square feet of her home for a qualified business use. Taxact 2011 free edition On August 5, she expanded the area of her qualified use to 330 square feet. Taxact 2011 free edition Amy continued to use the 330 square feet until the end of the year. Taxact 2011 free edition 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). Taxact 2011 free edition Gross income limitation. Taxact 2011 free edition   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. Taxact 2011 free edition 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. Taxact 2011 free edition Business expenses not related to use of the home. Taxact 2011 free edition   These expenses relate to the business activity in the home, but not to the use of the home itself. Taxact 2011 free edition You can still deduct business expenses that are unrelated to the use of the home. Taxact 2011 free edition See Where To Deduct , later. Taxact 2011 free edition Examples of business expenses that are unrelated to the use of the home are advertising, wages, supplies, dues, and depreciation for equipment. Taxact 2011 free edition Space used regularly for daycare. Taxact 2011 free edition   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. Taxact 2011 free edition The reduced rate will equal the prescribed rate times a fraction. Taxact 2011 free edition 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. Taxact 2011 free edition You can use the Daycare Facility Worksheet (for simplified method), near the end of this publication, to help you figure the reduced rate. Taxact 2011 free edition    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. Taxact 2011 free edition 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. Taxact 2011 free edition To qualify for this exception to the exclusive use rule, you must meet both of the following requirements. Taxact 2011 free edition 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. Taxact 2011 free edition 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. Taxact 2011 free edition You do not meet this requirement if your application was rejected or your license or other authorization was revoked. Taxact 2011 free edition Figuring the deduction. Taxact 2011 free edition   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. Taxact 2011 free edition    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. Taxact 2011 free edition If you also use that part exclusively for daycare, deduct all the allocable expenses, subject to the deduction limit, as explained earlier. Taxact 2011 free edition   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. Taxact 2011 free edition 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. Taxact 2011 free edition You do not have to keep records to show the specific hours the area was used for business. Taxact 2011 free edition You can use the area occasionally for personal reasons. Taxact 2011 free edition However, a room you use only occasionally for business does not qualify for the deduction. Taxact 2011 free edition 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. Taxact 2011 free edition You can compare the hours of business use in a week with the number of hours in a week (168). Taxact 2011 free edition Or you can compare the hours of business use for the year with the number of hours in the year (8,760 in 2013). Taxact 2011 free edition 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. Taxact 2011 free edition Example 1. Taxact 2011 free edition Mary Lake used her basement to operate a daycare business for children. Taxact 2011 free edition She figures the business percentage of the basement as follows. Taxact 2011 free edition 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. Taxact 2011 free edition During the other 12 hours a day, the family could use the basement. Taxact 2011 free edition She figures the percentage of time the basement was used for daycare as follows. Taxact 2011 free edition 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. Taxact 2011 free edition 25%           Mary can deduct 34. Taxact 2011 free edition 25% of any direct expenses for the basement. Taxact 2011 free edition However, because her indirect expenses are for the entire house, she can deduct only 17. Taxact 2011 free edition 13% of the indirect expenses. Taxact 2011 free edition She figures the percentage for her indirect expenses as follows. Taxact 2011 free edition Business percentage of the basement 50% Multiplied by: Percentage of time used for daycare × 34. Taxact 2011 free edition 25% Percentage for indirect expenses 17. Taxact 2011 free edition 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. Taxact 2011 free edition In Part II, Mary figures her deductible expenses. Taxact 2011 free edition She uses the following information to complete Part II. Taxact 2011 free edition 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. Taxact 2011 free edition (This figure is the same as the amount on line 29 of her Schedule C (Form 1040). Taxact 2011 free edition ) The expenses she paid for rent and utilities relate to her entire home. Taxact 2011 free edition Therefore, she enters the amount paid for rent on line 18, column (b), and the amount paid for utilities on line 20, column (b). Taxact 2011 free edition She shows the total of these expenses on line 22, column (b). Taxact 2011 free edition For line 23, she multiplies the amount on line 22, column (b) by the percentage on line 7 and enters the result, $1,585. Taxact 2011 free edition Mary paid $500 to have the basement painted. Taxact 2011 free edition The painting is a direct expense. Taxact 2011 free edition 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. Taxact 2011 free edition 25% – line 6). Taxact 2011 free edition She enters $171 (34. Taxact 2011 free edition 25% × $500) on line 19, column (a). Taxact 2011 free edition She adds line 22, column (a), and line 23 and enters $1,756 ($171 + $1,585) on line 25. Taxact 2011 free edition This is less than her deduction limit (line 15), so she can deduct the entire amount. Taxact 2011 free edition She follows the instructions to complete the rest of Part II and enters $1,756 on lines 33 and 35. Taxact 2011 free edition She then carries the $1,756 to line 30 of her Schedule C (Form 1040). Taxact 2011 free edition Example 2. Taxact 2011 free edition 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. Taxact 2011 free edition 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. Taxact 2011 free edition 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. Taxact 2011 free edition The basement and room are 60% of the total area of her home. Taxact 2011 free edition In figuring her expenses, 34. Taxact 2011 free edition 25% of any direct expenses for the basement and room are deductible. Taxact 2011 free edition In addition, 20. Taxact 2011 free edition 55% (34. Taxact 2011 free edition 25% × 60%) of her indirect expenses are deductible. Taxact 2011 free edition Example 3. Taxact 2011 free edition Assume the same facts as in Example 1 except that Mary stopped using her home for a daycare facility on June 24, 2013. Taxact 2011 free edition 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. Taxact 2011 free edition During the other 12 hours a day, the family could still use the basement. Taxact 2011 free edition She figures the percentage of time the basement was used for business as follows. Taxact 2011 free edition 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. Taxact 2011 free edition 71%           Mary can deduct 35. Taxact 2011 free edition 71% of any direct expenses for the basement. Taxact 2011 free edition However, because her indirect expenses are for the entire house, she can deduct only 17. Taxact 2011 free edition 86% of the indirect expenses. Taxact 2011 free edition She figures the percentage for her indirect expenses as follows. Taxact 2011 free edition Business percentage of the basement 50% Multiplied by: Percentage of time used for daycare × 35. Taxact 2011 free edition 71% Percentage for indirect expenses 17. Taxact 2011 free edition 86% Meals. Taxact 2011 free edition   If you provide food for your daycare recipients, do not include the expense as a cost of using your home for business. Taxact 2011 free edition Claim it as a separate deduction on your Schedule C (Form 1040). Taxact 2011 free edition You can never deduct the cost of food consumed by you or your family. Taxact 2011 free edition 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. Taxact 2011 free edition 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. Taxact 2011 free edition 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. Taxact 2011 free edition   If you deduct the actual cost of food for your daycare business, keep a separate record (with receipts) of your family's food costs. Taxact 2011 free edition   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. Taxact 2011 free edition If your reimbursements are more than your expenses for food, show the difference as income in Part I of Schedule C (Form 1040). Taxact 2011 free edition If your food expenses are greater than the reimbursements, show the difference as an expense in Part V of Schedule C (Form 1040). Taxact 2011 free edition Do not include payments or expenses for your own children if they are eligible for the program. Taxact 2011 free edition Follow this procedure even if you receive a Form 1099-MISC, Miscellaneous Income, reporting a payment from the sponsor. Taxact 2011 free edition Standard meal and snack rates. Taxact 2011 free edition   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. Taxact 2011 free edition For these purposes: A family daycare provider is a person engaged in the business of providing family daycare. Taxact 2011 free edition Family daycare is childcare provided to eligible children in the home of the family daycare provider. Taxact 2011 free edition The care must be non-medical, not involve a transfer of legal custody, and generally last less than 24 hours each day. Taxact 2011 free edition Eligible children are minor children receiving family daycare in the home of the family daycare provider. Taxact 2011 free edition 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. Taxact 2011 free edition Eligible children do not include children who receive daycare services for personal reasons of the provider. Taxact 2011 free edition For example, if a provider provides daycare services for a relative as a favor to that relative, that child is not an eligible child. Taxact 2011 free edition   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. Taxact 2011 free edition 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. Taxact 2011 free edition 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. Taxact 2011 free edition   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. Taxact 2011 free edition 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. Taxact 2011 free edition 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. Taxact 2011 free edition   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. Taxact 2011 free edition 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. Taxact 2011 free edition This information can be recorded in a log similar to the one shown in Exhibit A, near the end of this publication. Taxact 2011 free edition   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. Taxact 2011 free edition These expenses can be claimed as a separate deduction on your Schedule C (Form 1040). Taxact 2011 free edition     Table 3. Taxact 2011 free edition Standard Meal and Snack Rates1 Location of Family Daycare Provider Breakfast Lunch Dinner Snack States other than Alaska an