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p587 | Tax Deduction | Depreciation
p587
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home use business
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Reminders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Qualifying for a Deduction . . . . . . . . . . . . . . . . . . . Figuring the Deduction . . . . . . . . . . . . . . . . . . . . . . Deducting Expenses . . . . . . . . . . . . . . . . . . . . . . . 1 1 2 6 8
Publication 587
Cat. No. 15154T
(Including Use by Daycare Providers)
For use in preparing
Depreciating Your Home . . . . . . . . . . . . . . . . . . . . 10 Daycare Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Sale or Exchange of Your Home . . . . . . . . . . . . . . 14 Business Furniture and Equipment . . . . . . . . . . . . 15 Recordkeeping . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Where To Deduct . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Schedule C Example . . . . . . . . . . . . . . . . . . . . . . . 21 Worksheet To Figure the Deduction for Business Use of Your Home . . . . . . . . . . . . . . 26 Instructions for the Worksheet . . . . . . . . . . . . . . . 27 How To Get Tax Help . . . . . . . . . . . . . . . . . . . . . . . 28 Exhibit A. Family Daycare Provider Meal and Snack Log . . . . . . . . . . . . . . . . . . . . . . . . . 31 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2011 Returns
Future Developments. The IRS has created a page on IRS.gov for information about Publication 587, at www.irs. gov/pub587. Information about any future developments affecting Publication 587 (such as legislation enacted after we release it) will be posted on that page.
Get forms and other information faster and easier by: Internet IRS.gov
The purpose of this publication is to provide information on figuring and claiming the deduction for business use of your home. The term “home” includes a house, apartment,
www.irs.gov/efile
condominium, mobile home, boat, or similar property which provides basic living accommodations. It also includes structures on the property, such as an unattached garage, studio, barn, or greenhouse. However, it does not include any part of your property used exclusively as a hotel, motel, inn, or similar establishment. This publication includes information on the following.
Tax questions. If you have a tax question, check the information available on IRS.gov or call 1-800-829-1040. We cannot answer tax questions sent to either of the earlier addresses.
Publications J 523 J 551 J 583 J 946
• The requirements for qualifying to deduct expenses • Types of expenses you can deduct. • How to figure the deduction (including depreciation
of your home).
for the business use of your home (including special rules for storing inventory or product samples).
Selling Your Home Basis of Assets Starting a Business and Keeping Records How To Depreciate Property
• Special rules for daycare providers. • Selling a home that was used partly for business. • Deducting expenses for furniture and equipment
used in your business.
Forms (and Instructions) J Schedule C (Form 1040) Profit or Loss from Business J 2106 Employee Business Expenses J 2106-EZ Unreimbursed Employee Business Expenses J 4562 Depreciation and Amortization J 8829 Expenses for Business Use of Your Home See How To Get Tax Help near the end of this publication for information about getting publications and forms.
• Records you should keep. • Where to deduct your expenses.
The rules in this publication apply to individuals. If you need information on deductions for renting out your property, see Publication 527, Residential Rental Property. Comments and suggestions. We welcome your comments about this publication and your suggestions for future editions. You can write to us at the following address: Internal Revenue Service Individual and Specialty Forms and Publications Branch SE:W:CAR:MP:T:I 1111 Constitution Ave. NW, IR-6526 Washington, DC 20224 We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. You can email us at taxforms@irs.gov. Please put “Publications Comment” on the subject line. You can also send us comments from www.irs.gov/formspubs/. Select “Comment on Tax Forms and Publications” under “Information about.” Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Ordering forms and publications. Visit www.irs.gov/ formspubs/ to download forms and publications, call 1-800-829-3676, or write to the address below and receive a response within 10 days after your request is received. Internal Revenue Service 1201 N. Mitsubishi Motorway Bloomington, IL 61705-6613 Page 2
Qualifying for a Deduction
Generally, you cannot deduct items such as mortgage interest and real estate taxes as business expenses. However, you may be able to deduct expenses related to the business use of part of your home if you meet specific requirements. Even then, your deduction may be limited. Use this section and Figure A, later, to decide if you can deduct expenses for the business use of your home. 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, age of inventory or product samples, later),
• On a regular basis for certain storage use (see Stor• For rental use (see Publication 527), or • As a daycare facility (see Daycare Facility, later).
Additional tests for employee use. If you are an employee and you use a part of your home for business, you Publication 587 (2011)
may qualify for a deduction for its business use. 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
use half of your basement for storage of inventory and product samples. You sometimes use the area for personal purposes. The expenses for the storage space are deductible even though you do not use this part of your basement exclusively for business.
employer and use the rented portion to perform services as an employee for that employer.
To qualify under the regular use test, you must use a specific area of your home for business on a regular basis. Incidental or occasional business use is not regular use. You must consider all facts and circumstances in determining whether your use is on a regular basis.
If the use of the home office is merely appropriate and helpful, you cannot deduct expenses for the business use of your home.
To qualify under the exclusive use test, you must use a specific area of your home only for your trade or business. The area used for business can be a room or other separately identifiable space. The space does not need to be marked off by a permanent partition. 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. Example. You are an attorney and use a den in your home to write legal briefs and prepare clients’ tax returns. Your family also uses the den for recreation. The den is not used exclusively in your trade or business, so you cannot claim a deduction for the business use of the den.
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. 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. Example. You use part of your home exclusively and regularly to read financial periodicals and reports, clip bond coupons, and carry out similar activities related to your own investments. You do not make investments as a broker or dealer. So, your activities are not part of a trade or business and you cannot take a deduction for the business use of your home.
Exceptions to Exclusive Use
You do not have to meet the exclusive use test if either of the following applies.
You can have more than one business location, including your home, for a single trade or business. To qualify to deduct the expenses for the business use of your home under the principal place of business test, your home must be your principal place of business for that trade or business. To determine whether your home is your principal place of business, you must consider:
• You use part of your home for the storage of inventory or product samples (discussed next). discussed later under Daycare Facility.
• You use part of your home as a daycare facility,
Storage of inventory or product samples. If you use part of your home for storage of inventory or product samples, you can deduct expenses for the business use of your home without meeting the exclusive use test. However, you must meet all the following tests.
• The relative importance of the activities performed at
each place where you conduct business, and conduct business.
• The amount of time spent at each place where you
Your home office will qualify as your principal place of business if you meet the following requirements.
• You sell products at wholesale or retail as your trade
or business.
• You use it exclusively and regularly for administra-
• You keep the inventory or product samples in your
home for use in your trade or business. business.
tive or management activities of your trade or business. substantial administrative or management activities of your trade or business.
• Your home is the only fixed location of your trade or • You use the storage space on a regular basis. • The space you use is a separately identifiable space
suitable for storage. Example. Your home is the only fixed location of your business of selling mechanics’ tools at retail. You regularly Publication 587 (2011)
• You have no other fixed location where you conduct
If, after considering your business locations, your home cannot be identified as your principal place of business, you cannot deduct home office expenses. However, see the later discussions under Place To Meet Patients, Clients, or Customers andSeparate Structure for other ways to qualify to deduct home office expenses. Page 3
Figure A. Can You Deduct Business Use of the Home Expenses? Do not use this chart if you use your home for the storage of
inventory or product samples, or to operate a daycare facility. See Exceptions to Exclusive Use, earlier, and Daycare Facility, later.
Start Here: No Is part of your home used in connection with a trade or business? Yes Are you an employee? Yes No Do you work at home for the convenience of your employer? Yes Yes Do you rent part of your home used for business to your employer? No No
No Yes Is the use regular and exclusive?
Is it your principal place of business? No Do you meet patients, clients, or customers in your home? No No deduction No Is it a separate structure?
Deduction allowed
Administrative or management activities. There are many activities that are administrative or managerial in nature. The following are a few examples.
home. (For example, another company does your billing from its place of business.)
Billing customers, clients, or patients. Keeping books and records. Ordering supplies. Setting up appointments. Forwarding orders or writing reports.
• 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. management activities at a fixed location outside your home.
• You occasionally conduct minimal administrative or • You conduct substantial nonadministrative or non-
Administrative or management activities performed at other locations. The following activities performed by you or others will not disqualify your home office from being your principal place of business.
management business activities at a fixed location outside your home. (For example, you meet with or provide services to customers, clients, or patients at a fixed location of the business outside your home.) management activities outside your home, but choose to use your home office for those activities instead.
• You have suitable space to conduct administrative or
• You have others conduct your administrative or
management activities at locations other than your
Publication 587 (2011)
Example 1. John is a self-employed plumber. Most of John’s time is spent at customers’ homes and offices installing and repairing plumbing. He has a small office in his home that he uses exclusively and regularly for the administrative or management activities of his business, such as phoning customers, ordering supplies, and keeping his books. John writes up estimates and records of work completed at his customers’ premises. He does not conduct any substantial administrative or management activities at any fixed location other than his home office. John does not do his own billing. He uses a local bookkeeping service to bill his customers. John’s home office qualifies as his principal place of business for deducting expenses for its use. He uses the home office for the administrative or managerial activities of his plumbing business and he has no other fixed location where he conducts these administrative or managerial activities. His choice to have his billing done by another company does not disqualify his home office from being his principal place of business. He meets all the qualifications, including principal place of business, so he can deduct expenses (to the extent of the deduction limit, explained later) for the business use of his home. Example 2. Pamela is a self-employed sales representative for several different product lines. She has an office in her home that she uses exclusively and regularly to set up appointments and write up orders and other reports for the companies whose products she sells. She occasionally writes up orders and sets up appointments from her hotel room when she is away on business overnight. Pamela’s business is selling products to customers at various locations throughout her territory. To make these sales, she regularly visits customers to explain the available products and take orders. Pamela’s home office qualifies as her principal place of business for deducting expenses for its use. She conducts administrative or management activities there and she has no other fixed location where she conducts substantial administrative or management activities. The fact that she conducts some administrative or management activities in her hotel room (not a fixed location) does not disqualify her home office from being her principal place of business. She meets all the qualifications, including principal place of business, so she can deduct expenses (to the extent of the deduction limit, explained later) for the business use of her home. Example 3. Paul is a self-employed anesthesiologist. He spends the majority of his time administering anesthesia and postoperative care in three local hospitals. One of the hospitals provides him with a small shared office where he could conduct administrative or management activities. Paul very rarely uses the office the hospital provides. He uses a room in his home that he has converted to an office. He uses this room exclusively and regularly to conduct all the following activities.
• Maintaining billing records and patient logs. • Satisfying continuing medical education requirements.
• Reading medical journals and books.
Paul’s home office qualifies as his principal place of business for deducting expenses for its use. He conducts administrative or management activities for his business as an anesthesiologist there and he has no other fixed location where he conducts substantial administrative or management activities for this business. His choice to use his home office instead of the one provided by the hospital does not disqualify his home office from being his principal place of business. His performance of substantial nonadministrative or nonmanagement activities at fixed locations outside his home also does not disqualify his home office from being his principal place of business. He meets all the qualifications, including principal place of business, so he can deduct expenses (to the extent of the deduction limit, explained later) for the business use of his home. Example 4. Kathleen is employed as a teacher. She is required to teach and meet with students at the school and to grade papers and tests. 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. The school does not require her to work at home. Kathleen prefers to use the office she has set up in her home and does not use the one provided by the school. She uses this home office exclusively and regularly for the administrative duties of her teaching job. 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. Her employer provides her with an office and does not require her to work at home, so she does not meet the convenienceof-the-employer test and cannot claim a deduction for the business use of her home.
More Than One Trade or Business
The same home office can be the principal place of business for two or more separate business activities. Whether your home office is the principal place of business for more than one business activity must be determined separately for each of your trade or business activities. You must use the home office exclusively and regularly for one or more of the following purposes.
• As the principal place of business for one or more of
your trades or businesses.
• As a place to meet or deal with patients, clients, or
customers in the normal course of one or more of your trades or businesses. nection with one or more of your trades or businesses.
• Contacting patients, surgeons, and hospitals regarding scheduling.
• If your home office is a separate structure, in con-
• Preparing for treatments and presentations.
You can use your home office for more than one business activity, but you cannot use it for any nonbusiness (i.e., personal) activities. If you are an employee, any use of the home office in connection with your employment must be for the convenience of your employer. See Rental to employer, later, if you rent part of your home to your employer. Example. Tracy White is employed as a teacher. Her principal place of work is the school, which provides her office space to do her school work. She also has a mail order jewelry business. All her work in the jewelry business is done in her home office and the office is used exclusively for that business. If she meets all the other tests, she can deduct expenses for the business use of her home for the jewelry business. 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. As an employee, Tracy must also meet the convenience-of-the-employer test to qualify for the deduction. 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.
structure does not have to be your principal place of business or a place where you meet patients, clients, or customers. Example. John Berry operates a floral shop in town. He grows the plants for his shop in a greenhouse behind his home. He uses the greenhouse exclusively and regularly in his business, so he can deduct the expenses for its use, subject to the deduction limit, explained later.
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. You will need to figure the percentage of your home used for business and the limit on the deduction. If you are an employee or a partner, or you file Schedule F (Form 1040), Profit or Loss From Farming, use the Worksheet To Figure the Deduction for Business Use of Your Home, near the end of this publication, to help figure your deduction. If you file Schedule C (Form 1040), Profit or Loss From Business, you must generally use Form 8829. The Schedule C Example, near the end of this publication, shows how to report the deduction on Form 8829. Rental to employer. 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. You can deduct mortgage interest, qualified mortgage insurance premiums, real estate taxes, and personal casualty losses for the rented part, subject to any limitations. However, you cannot deduct otherwise allowable trade or business expenses, business casualty losses, or depreciation related to the use of your home in performing services for your employer.
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.
• You physically meet with patients, clients, or customers on your premises.
• Their use of your home is substantial and integral to
the conduct of your business. Doctors, dentists, attorneys, and other professionals who maintain offices in their homes generally will meet this requirement. Using your home for occasional meetings and telephone calls will not qualify you to deduct expenses for the business use of your home. 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. Example. June Quill, a self-employed attorney, works 3 days a week in her city office. She works 2 days a week in her home office used only for business. She regularly meets clients there. Her home office qualifies for a business deduction because she meets clients there in the normal course of her business.
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. Use the resulting percentage to figure the business part of the expenses for operating your entire home. You can use any reasonable method to determine the business percentage. The following are two commonly used methods for figuring the percentage. 1. Divide the area (length multiplied by the width) used for business by the total area of your home. 2. 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. Example 1.
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. The Page 6
• Your office is 240 square feet (12 feet × 20 feet). • Your home is 1,200 square feet.
• Your office is 20% (240 ÷ 1,200) of the total area of
• Your business percentage is 20%.
Carryover of unallowed expenses. If your deductions are greater than the current year’s limit, you can carry over the excess to the next year. They are subject to the deduction limit for that year, whether or not you live in the same home during that year. Figuring the deduction limit and carryover. 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. If you file Schedule C (Form 1040), figure your deduction limit and carryover on Form 8829. Example. You meet the requirements for deducting expenses for the business use of your home. You use 20% of your home for business. In 2011, your business expenses and the expenses for the business use of your home are deducted from your gross income in the following order.
Gross income from business . . . . . . . . . . . . . . . . . . . . Minus: Deductible mortgage interest and real estate taxes (20%) . . . . . . . . . . . . . . . . . . . Business expenses not related to the use of your home (100%) (business phone, supplies, and depreciation on equipment) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deduction limit . . . . . . . . . . . . . . . . . . . . . . . . . . . . Minus other expenses allocable to business use of home: Maintenance, insurance, and utilities (20%) . . . . . . . . . Depreciation allowed (20% = $1,600 allowable, but subject to balance of deduction limit) . . . . . . . . . . . . . Other expenses up to the deduction limit . . . . . . . . . . . . Depreciation carryover to 2012 ($1,600 − $200) (subject to deduction limit in 2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,000 3,000 2,000 $1,000 800 200 $1,000 $1,400
• You use one room in your home for business. • Your home has 10 rooms, all about equal size. • Your office is 10% (1 ÷ 10) of the total area of your
• Your business percentage is 10%.
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.
Part-Year Use
You cannot deduct expenses for the business use of your home incurred during any part of the year you did not use your home for business purposes. For example, if you begin using part of your home for business on July 1, and you meet all the tests from that date until the end of the year, consider only your expenses for the last half of the year in figuring your allowable deduction.
If 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. 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. Your deduction of otherwise nondeductible expenses, such as insurance, utilities, and depreciation (with depreciation 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. 1. 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)). These expenses are discussed in detail under Deducting Expenses, later. 2. 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. If you are self-employed, do not include in (2) above your deduction for half of your self-employment tax.
You can deduct all of the business part of your deductible mortgage interest and real estate taxes ($3,000). You also can deduct all of your business expenses not related to the use of your home ($2,000). Additionally, you can deduct all of the business part of your expenses for maintenance, insurance, and utilities, because the total ($800) is less than the $1,000 deduction limit. Your deduction for depreciation for the business use of your home is limited to $200 ($1,000 minus $800) because of the deduction limit. You can carry over the $1,400 balance and add it to your depreciation for 2012, subject to your deduction limit in 2012. More than one place of business. If part of the gross income from your trade or business is from the business use of part of your home and part is from a place other than your home, you must determine the part of your gross income from the business use of your home before you figure the deduction limit. In making this determination, consider the time you spend at each location, the business investment in each location, and any other relevant facts and circumstances. If your home office qualifies as your principal place of business, you can deduct your daily transportation costs between your home and another work location in the same trade or business. For more information on transportation costs, see Publication 463, Travel, Entertainment, Gift, and Car Expenses.
If you qualify to deduct expenses for the business use of your home, you must divide the expenses of operating your home between personal and business use. This section discusses the types of expenses you may have and gives examples and brief explanations of these expenses.
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.
Examples of Expenses
Certain expenses are deductible whether or not you use your home for business. 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. These expenses include the following.
The part of a home operating expense you can use to figure your deduction depends on both of the following.
• Whether the expense is direct, indirect, or unrelated. • The percentage of your home used for business.
Table 1, next, describes the types of expenses you may have and the extent to which they are deductible.
Real estate taxes. Qualified mortgage insurance premiums. Deductible mortgage interest. Casualty losses.
Table 1. Types of Expenses
Expense Direct Description Expenses only for the business part of your home. Examples: Painting or repairs only in the area used for business. Indirect Expenses for keeping up and running your entire home. Examples: Insurance, utilities, and general repairs. Unrelated Expenses only for the parts of your home not used for business. Examples: Lawn care or painting a room not used for business. *Subject to the deduction limit, discussed earlier. Not deductible. Deductibility Deductible in full.*
Other expenses are deductible only if you use your home for business. You can use the business percentage of these expenses to figure your total business use of the home deduction. These expenses generally include (but are not limited to) the following.
• Depreciation (covered under Depreciating Your
Home, later).
Exception: May be only partially deductible in a daycare facility. See Daycare Facility, later. Deductible based on the percentage of your home used for business.*
• Insurance. • Rent paid for the use of property you do not own but
use in your trade or business.
• Repairs. • Security system. • Utilities and services. Real Estate Taxes
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. For more information on the deduction for real estate taxes, see Publication 530, Tax Information for First-Time Homeowners.
Deductible Mortgage Interest
To figure the business part of your deductible mortgage interest, multiply this interest by the percentage of your home used for business. You can include interest on a second mortgage in this computation. 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. For more information on what interest is deductible, see Publication 936, Home Mortgage Interest Deduction.
Form 8829 and the Worksheet To Figure the TIP Deduction for Business Use of Your Home (both illustrated near the end of this publication) have separate columns for direct and indirect expenses. Expenses related to tax-exempt income. Generally, you cannot deduct expenses that are related to tax-exempt allowances. However, if you receive a tax-exempt parsonage allowance or a tax-exempt military allowance, your expenses for mortgage interest and real estate taxes are deductible under the normal rules. No deduction is allowed for other expenses related to the tax-exempt allowance.
Qualified Mortgage Insurance Premiums
To figure the business part of your qualified mortgage insurance premiums, multiply the premiums by the percentage of your home used for business. You can include Publication 587 (2011)
premiums for insurance on a second mortgage in this computation. 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. For more information, see Publication 936, and Line 13 in the Instructions for Schedule A (Form 1040).
You can deduct the cost of insurance that covers the business part of your home. However, if your insurance premium gives you coverage for a period that extends past the end of your tax year, you can deduct only the business percentage of the part of the premium that gives you coverage for your tax year. You can deduct the business percentage of the part that applies to the following year in that year.
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.
If you rent the home you occupy and meet the requirements for business use of the home, you can deduct part of the rent you pay. To figure your deduction, multiply your rent payments by the percentage of your home used for business. If you own your home, you cannot deduct the fair rental value of your home. However, see Depreciating Your Home, later.
• A direct expense is the loss on the portion of the
property you use only in your business. Use the entire loss to figure the business use of the home deduction. for both business and personal purposes. Use only the business portion to figure the deduction.
• An indirect expense is the loss on property you use • An unrelated expense is the loss on property you do
not use in your business. Do not use any of the loss to figure the deduction.
The cost of repairs that relate to your business, including labor (other than your own labor), is a deductible expense. For example, a furnace repair benefits the entire home. If you use 10% of your home for business, you can deduct 10% of the cost of the furnace repair. Repairs keep your home in good working order over its useful life. Examples of common repairs are patching walls and floors, painting, wallpapering, repairing roofs and gutters, and mending leaks. However, repairs are sometimes treated as a permanent improvement and are not deductible. See Permanent improvements, later, under Depreciating Your Home.
Example. You meet the rules to take a deduction for an office in your home that is 10% of the total area of your house. A storm damages your roof. 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. You would complete Form 4684, Casualties and Thefts, to report your loss. 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. 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. 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 line 18 of Form 4684. Forms and worksheets to use. If you are filing Schedule C (Form 1040), get Form 8829 and follow the instructions for casualty losses. 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. You will also need to get Form 4684. More information. For more information on casualty losses, see Publication 547, Casualties, Disasters, and Thefts.
If you install a security system that protects all the doors and windows in your home, you can deduct the business part of the expenses you incur to maintain and monitor the system. You also can take a depreciation deduction for the part of the cost of the security system relating to the business use of your home.
Expenses for utilities and services, such as electricity, gas, trash removal, and cleaning services, are primarily personal expenses. However, if you use part of your home for business, you can deduct the business part of these expenses. Generally, the business percentage for utilities is the same as the percentage of your home used for business. Telephone. The basic local telephone service charge, including taxes, for the first telephone line into your home (i.e., landline) is a nondeductible personal expense. However, charges for business long-distance phone calls on
that line, as well as the cost of a second line into your home used exclusively for business, are deductible business expenses. Do not include these expenses as a cost of using your home for business. Deduct these charges separately on the appropriate form or schedule. For example, if you file Schedule C (Form 1040), deduct these expenses on line 25, Utilities (instead of line 30, Expenses for business use of your home).
However, because the work gives your property a new use, the entire remodeling job is a permanent improvement and its cost is added to the basis of the property. You cannot deduct any portion of it as a repair expense. Adjusting for depreciation deducted in earlier years. Decrease the basis of your property by the depreciation you deducted, or could have deducted, on your tax returns under the method of depreciation you properly selected. If you deducted less depreciation than you could have under the method you selected, decrease the basis by the amount you could have deducted under that method. If you did not deduct any depreciation, decrease the basis by the amount you could have deducted. 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. If you deducted the incorrect amount of depreciation, see Publication 946. Fair market value defined. The fair market value of your home is the price at which the property would change hands between a buyer and a seller, neither having to buy or sell, and both having reasonable knowledge of all necessary facts. Sales of similar property, on or about the date you begin using your home for business, may be helpful in determining the property’s fair market value.
Depreciating Your Home
If you own your home and qualify to deduct expenses for its business use, you can claim a deduction for depreciation. Depreciation is an allowance for the wear and tear on the part of your home used for business. You cannot depreciate the cost or value of the land. You recover its cost when you sell or otherwise dispose of the property. Before you figure your depreciation deduction, you need to know the following information.
• The month and year you started using your home for
• The adjusted basis and fair market value of your
home (excluding land) at the time you began using it for business. began using the property for business.
• The cost of any improvements before and after you • The percentage of your home used for business.
See Business Percentage, earlier, under Figuring the Deduction.
Figuring the Depreciation Deduction for the Current Year
If you began using your home for business before 2011, continue to use the same depreciation method you used in past tax years. If you began using your home for business for the first time in 2011, depreciate the business part as nonresidential real property under the modified accelerated cost recovery system (MACRS). Under MACRS, nonresidential real property is depreciated using the straight line method over 39 years. For more information on MACRS and other methods of depreciation, see Publication 946. To figure the depreciation deduction, you must first figure the part of the cost of your home that can be depreciated (depreciable basis). The depreciable basis is figured by multiplying the percentage of your home used for business by the smaller of the following.
Adjusted basis defined. The adjusted basis of your home is generally its cost, plus the cost of any permanent improvements you made to it, minus any casualty losses or depreciation deducted in earlier tax years. For a discussion of adjusted basis, see Publication 551. Permanent improvements. A permanent improvement increases the value of property, adds to its life, or gives it a new or different use. Examples of improvements are replacing electric wiring or plumbing, adding a new roof or addition, paneling, or remodeling. You must carefully distinguish between repairs and improvements. See Repairs, earlier, under Deducting Expenses. You also must keep accurate records of these expenses. These records will help you decide whether an expense is a deductible or a capital (added to the basis) expense. However, if you make repairs as part of an extensive remodeling or restoration of your home, the entire job is an improvement. Example. You buy an older home and fix up two rooms as a beauty salon. You patch the plaster on the ceilings and walls, paint, repair the floor, install an outside door, and install new wiring, plumbing, and other equipment. Normally, the patching, painting, and floor work are repairs and the other expenses are permanent improvements.
• The adjusted basis of your home (excluding land) on
the date you began using your home for business. on the date you began using your home for business.
• The fair market value of your home (excluding land)
Depreciation table. If 2011 was the first year you used your home for business, you can figure your 2011 depreciation for the business part of your home by using the appropriate percentage from the following table.
Table 2. MACRS Percentage Table for 39-Year Nonresidential Real Property
Month First Used for Business 1 2 3 4 5 6 7 8 9 10 11 12 Percentage To Use 2.461% 2.247% 2.033% 1.819% 1.605% 1.391% 1.177% 0.963% 0.749% 0.535% 0.321% 0.107%
Daycare Facility
If you use space in your home on a regular basis for providing daycare, you may be able to deduct the business expenses for that part of your home even if you use the same space for nonbusiness purposes. To qualify for this exception to the exclusive use rule, you must meet both of the following requirements.
• 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.
• 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. You do not meet this requirement if your application was rejected or your license or other authorization was revoked.
Multiply the depreciable basis of the business part of your home by the percentage from the table for the first month you use your home for business. See Publication 946 for the percentages for the remaining tax years of the recovery period. Example. In May, George Miller began to use one room in his home exclusively and regularly to meet clients. This room is 8% of the square footage of his home. He bought the home in 2001 for $125,000. He determined from his property tax records that his adjusted basis in the house (exclusive of land) is $115,000. In May, the house had a fair market value of $165,000. He multiplies his adjusted basis of $115,000 (which is less than the fair market value) by 8%. The result is $9,200, his depreciable basis for the business part of the house. George files his return based on the calendar year. May is the 5th month of his tax year. He multiplies his depreciable basis of $9,200 by 1.605% (.01605), the percentage from the table for the 5th month. His depreciation deduction is $147.66.
Figuring the deduction. If 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. If you use that part exclusively for daycare, deduct all the allocable expenses, subject to the deduction limit, as explained earlier. 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. 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. You do not have to keep records to show the specific hours the area was used for business. You can use the area occasionally for personal reasons. However, a room you use only occasionally for business does not qualify for the deduction. 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. You can compare the hours of business use in a week with the number of hours in a week (168). Or you can compare the hours of business use for the year with the number of hours in the year (8,760 in 2011). If you started or stopped using your home for daycare in 2011, you must prorate the number of hours based on the number of days the home was available for daycare.
Depreciating Permanent Improvements
Add the costs of permanent improvements made before you began using your home for business to the basis of your property. Depreciate these costs as part of the cost of your home as explained earlier. The costs of improvements made after you begin using your home for business (that affect the business part of your home, such as a new roof) are depreciated separately. Multiply the cost of the improvement by the business-use percentage and depreciate the result over the recovery period that would apply to your home if you began using it for business at the same time as the improvement. For improvements made this year, the recovery period is 39 years. For the percentage to use for the first year, see Table 2, earlier. For more information on recovery periods, see Publication 946. Publication 587 (2011)
Example 1. Mary Lake used her basement to operate a daycare business for children. She figures the business percentage of the basement as follows.
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. During Page 11
the other 12 hours a day, the family could use the basement. She figures the percentage of time the basement was used for daycare as follows.
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 = 34.25%
basement and room are deductible. In addition, 20.55% (34.25% × 60%) of her indirect expenses are deductible. Example 3. Assume the same facts as in Example 1 except that Mary stopped using her home for a daycare facility on June 24, 2011. 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. During the other 12 hours a day, the family could still use the basement. She figures the percentage of time the basement was used for business as follows.
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 = 35.71%
Mary can deduct 34.25% of any direct expenses for the basement. However, because her indirect expenses are for the entire house, she can deduct only 17.13% of the indirect expenses. She figures the percentage for her indirect expenses as follows.
Business percentage of the basement . . . . . . . . . . . . . . . Multiplied by: Percentage of time used for daycare . . . . . . Percentage for indirect expenses . . . . . . . . . . . . . . . . . . 50% × 34.25% 17.13%
Mary completes Form 8829, shown later. In Part I, she figures the percentage of her home used for business, including the percentage of time the basement was used. In Part II, Mary figures her deductible expenses. She uses the following information to complete Part II.
Gross income from her daycare business . . . . . . . . . . . . . Expenses not related to the business use of the home . . . . Tentative profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Painting the basement . . . . . . . . . . . . . . . . . . . . . . . . . $50,000 $25,000 $25,000 $8,400 $850 $500
Mary can deduct 35.71% of any direct expenses for the basement. However, because her indirect expenses are for the entire house, she can deduct only 17.86% of the indirect expenses. She figures the percentage for her indirect expenses as follows.
Business percentage of the basement . . . . . . . . . . . . . . . Multiplied by: Percentage of time used for daycare . . . . . . Percentage for indirect expenses . . . . . . . . . . . . . . . . . . 50% × 35.71% 17.86%
Mary enters her tentative profit, $25,000, on line 8. (This figure is the same as the amount on line 29 of her Schedule C (Form 1040).) The expenses she paid for rent and utilities relate to her entire home. Therefore, she enters the amount paid for rent on line 18, column (b), and the amount paid for utilities on line 20, column (b). She shows the total of these expenses on line 22, column (b). For line 23, she multiplies the amount on line 22, column (b) by the percentage on line 7 and enters the result, $1,585. Mary paid $500 to have the basement painted. The painting is a direct expense. 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 (34.25% – line 6). She enters $171 (34.25% × $500) on line 19, column (a). She adds line 22, column (a), and line 23 and enters $1,756 ($171 + $1,585) on line 25. This is less than her deduction limit (line 15), so she can deduct the entire amount. She follows the instructions to complete the rest of Part II and enters $1,756 on lines 33 and 35. She then carries the $1,756 to line 30 of her Schedule C (Form 1040)(not shown). Example 2. 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. 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. 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. The basement and room are 60% of the total area of her home. In figuring her expenses, 34.25% of any direct expenses for the Page 12
Meals. If you provide food for your daycare recipients, do not include the expense as a cost of using your home for business. Claim it as a separate deduction on your Schedule C (Form 1040). You can never deduct the cost of food consumed by you or your family. 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. 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. 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. If you deduct the actual cost of food for your daycare business, keep a separate record (with receipts) of your family’s food costs. Reimbursements you receive from a sponsor under the Child and Adult Food Care Program of the Department of Agriculture are taxable only to the extent they exceed your expenses for food for eligible children. If your reimbursements are more than your expenses for food, show the difference as income in Part I of Schedule C (Form 1040). If your food expenses are greater than the reimbursements, show the difference as an expense in Part V of Schedule C (Form 1040). Do not include payments or expenses for your own children if they are eligible for the program. Follow this procedure even if you receive a Form 1099-MISC, Miscellaneous Income, reporting a payment from the sponsor. Standard meal and snack rates. 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. For these purposes: Publication 587 (2011)
▶ File
OMB No. 1545-0074
Department of the Treasury Internal Revenue Service (99) Name(s) of proprietor(s)
only with Schedule C (Form 1040). Use a separate Form 8829 for each home you used for business during the year. ▶ See separate instructions.
Attachment Sequence No. 176 Your social security number
Mary Lake Part I Part of Your Home Used for Business
1 Area used regularly and exclusively for business, regularly for daycare, or for storage of inventory or product samples (see instructions) . . . . . . . . . . . . . . . . 2 Total area of home . . . . . . . . . . . . . . . . . . . . . . . . . 3 Divide line 1 by line 2. Enter the result as a percentage . . . . . . . . . . . . . For daycare facilities not used exclusively for business, go to line 4. All others go to line 7. 4 4 Multiply days used for daycare during year by hours used per day 3,000 hr. 8,760 hr. 5 Total hours available for use during the year (365 days x 24 hours) (see instructions) 5 . 3,425 6 6 Divide line 4 by line 5. Enter the result as a decimal amount . . . 7 Business percentage. For daycare facilities not used exclusively for business, multiply line 6 by line 3 (enter the result as a percentage). All others, enter the amount from line 3 . . . . . ▶ 1 2 3
412-22-1234 1,600 3,200 50
Figure Your Allowable Deduction 25,000
8 Enter the amount from Schedule C, line 29, plus any gain derived from the business use of your home and shown on Schedule D or Form 4797, minus any loss from the trade or business not derived from the business use of your home and shown on Schedule D or Form 4797. See instructions . . 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 Casualty losses (see instructions) . . . . . 9 10 Deductible mortgage interest (see instructions) 11 Real estate taxes (see instructions) . . . . 12 Add lines 9, 10, and 11 . . . . . . . . 13 Multiply line 12, column (b) by line 7 . . . . Add line 12, column (a) and line 13 . . . . Subtract line 14 from line 8. If zero or less, enter -0Excess mortgage interest (see instructions) . 16 Insurance . . . . . . . . . . . . 17 Rent . . . . . . . . . . . . . . 18 8,400 171 Repairs and maintenance . . . . . . . 19 850 20 Utilities . . . . . . . . . . . . . Other expenses (see instructions). . . . . 21 9,250 171 Add lines 16 through 21 . . . . . . . . 22 1,585 Multiply line 22, column (b) by line 7 . . . . . . . . . . . 23 Carryover of operating expenses from 2010 Form 8829, line 42 . . 24 Add line 22 column (a), line 23, and line 24. . . . . . . . . . . . . . . . . . Allowable operating expenses. Enter the smaller of line 15 or line 25 . . . . . . . . . Limit on excess casualty losses and depreciation. Subtract line 26 from line 15 . . . . . Excess casualty losses (see instructions) . . . . . . . . . 28 Depreciation of your home from line 41 below . . . . . . . 29 Carryover of excess casualty losses and depreciation from 2010 Form 8829, line 43 30 Add lines 28 through 30 . . . . . . . . . . . . . . . . . . . . . . . . Allowable excess casualty losses and depreciation. Enter the smaller of line 27 or line 31 . . Add lines 14, 26, and 32. . . . . . . . . . . . . . . . . . . . . . . . Casualty loss portion, if any, from lines 14 and 32. Carry amount to Form 4684 (see instructions) Allowable expenses for business use of your home. Subtract line 34 from line 33. Enter here and on Schedule C, line 30. If your home was used for more than one business, see instructions ▶
See instructions for columns (a) and (b) before completing lines 9–21.
(a) Direct expenses (b) Indirect expenses
-025,000
1,756 1,756 23,244
-0-01,756 -01,756
Depreciation of Your Home
Enter the smaller of your home’s adjusted basis or its fair market value (see instructions) . . Value of land included on line 36 . . . . . . . . . . . . . . . . . . . . . Basis of building. Subtract line 37 from line 36 . . . . . . . . . . . . . . . . Business basis of building. Multiply line 38 by line 7. . . . . . . . . . . . . . . Depreciation percentage (see instructions). . . . . . . . . . . . . . . . . . Depreciation allowable (see instructions). Multiply line 39 by line 40. Enter here and on line 29 above
Carryover of Unallowed Expenses to 2012
Form 8829 (2011)
42 Operating expenses. Subtract line 26 from line 25. If less than zero, enter -0- . . . . . . 43 Excess casualty losses and depreciation. Subtract line 32 from line 31. If less than zero, enter -0For Paperwork Reduction Act Notice, see your tax return instructions.
Cat. No. 13232M
• A family daycare provider is a person engaged in the
business of providing family daycare.
• Family daycare is childcare provided to eligible chil-
Table 3. July 1, 2010 – June 30, 2011 Standard Meal and Snack Rates
Location of Family Daycare Provider States other than Alaska and Hawaii Alaska Hawaii Breakfast Lunch Dinner Snack
dren in the home of the family daycare provider. The care must be non-medical, not involve a transfer of legal custody, and generally last less than 24 hours each day. daycare in the home of the family daycare provider. 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. Eligible children do not include children who receive daycare services for personal reasons of the provider. For example, if a provider provides daycare services for a relative as a favor to that relative, that child is not an eligible child.
• Eligible children are minor children receiving family
$1.19 $1.89 $1.38
$2.22 $3.60 $2.60
$0.66 $1.07 $0.77
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. 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. 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. 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. 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. 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. 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. 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. This information can be recorded in a log similar to the one shown in Exhibit A, near the end of this publication. 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. These expenses can be claimed as a separate deduction on your Schedule C (Form 1040).
Sale or Exchange of Your Home
If you sell or exchange your home, you may be able to exclude up to $250,000 ($500,000 for certain married persons filing a joint return) of the gain on the sale or exchange if you meet the ownership and use tests. Ownership and use tests. To qualify for the exclusion, you must meet the ownership and use tests. This means that during the 5-year period ending on the date of the sale:
• You owned the home for at least 2 years (ownership
test), and
• You lived in the home as your main home for at least
2 years (use test).
If you use property partly as a home and partly for business, the treatment of any gain on the sale varies depending on whether the part of the property used for business is part of your home or separate from it.
Part of Home Used for Business
If the part of your property used for business is within your home, such as a room used as a home office for a business or rooms used to provide daycare, you do not need to allocate gain on the sale of the property between the business part of the property and the part used as a home. In addition, you do not need to report the sale of the business part on Form 4797, Sales of Business Property. This is true whether or not you were entitled to claim any depreciation. However, you cannot exclude the part of any gain equal to any depreciation allowed or allowable after May 6, 1997. See Depreciation, later.
Separate Part of Property Used for Business
You may have used part of your property as a home and a separate part of it, such as an outbuilding, for business. Page 14 Publication 587 (2011)
Use test not met for business part. You cannot exclude gain on the separate part of your property used for business unless you owned and lived in that part of your property for at least 2 years during the 5-year period ending on the date of the sale. If you do not meet the use test for the business part of the property, an allocation of the gain on the sale is required. For this purpose, you must allocate the basis of the property and the amount realized upon its sale between the business part and the part used as a home. You must report the sale of the business part on Form 4797. Use test met for business part (business use in year of sale). If you used a separate part of your property for business in the year of sale, you should treat the sale of the property as the sale of two properties, even if you met the use test for the business part. You must report the sale of the business part on Form 4797. To determine the amount to report on Form 4797, you must divide your selling price, selling expenses, and basis between the part of the property used for business and the separate part used as your home. In the same way, if you qualify to exclude any of the gain on the business part of your property, also divide your maximum exclusion between that part of the property and the separate part used as your home. Excluding gain on the business part of your property. You generally can exclude gain on the part of your property used for business if you owned and lived in that part as your main home for at least 2 years during the 5-year period ending on the date of the sale. Use test met for business part (no business use in year of sale). If you have used a separate part of your property for business (though not in the year of sale) but meet the use test for both the business part and the part you use as a home, you do not need to treat the transaction as the sale of two properties. Also, you do not need to file Form 4797. You generally can exclude gain on the entire property.
Basis Adjustment
If you used any part of your home for business, you must adjust the basis of your home for any depreciation that was allowable for its business use, even if you did not claim it. If you deducted less depreciation than you could have under the method you properly selected, you must decrease the basis by the amount you could have deducted under that method. If you deducted more depreciation than you should have under the method you properly selected, you must decrease the basis by the amount you should have deducted, plus the part of the excess deducted that actually decreased your tax liability for any year. For more information on reducing the basis of your property for depreciation, see Publication 551.
Do not report the 2011 sale of your main home on your tax return unless:
• You have a gain and you do not qualify to exclude all
of it,
• You have a gain and choose not to exclude it, or • You received a Form 1099-S, Proceeds from Real
Estate Transactions, for the sale or exchange. If any of these conditions apply, report the gain or loss as explained in the Instructions for Schedule D. If you used the home for business, you may have to use Form 4797 to report the sale of the business part. See the Instructions for Form 4797.
This section covers only the basic rules for the sale or exchange of your home. For more information, see Publication 523.
If you were entitled to deduct depreciation on the part of your home used for business, you cannot exclude the part of the gain equal to any depreciation you deducted (or could have deducted) for periods after May 6, 1997. This means that when figuring the amount of gain you can exclude, you must reduce the total gain by any depreciation allowed or allowable on the part of your home used for business after May 6, 1997. If you can show by adequate records or other evidence that the depreciation you actually deducted (the allowed depreciation) was less than the amount you were entitled to deduct (the allowable depreciation), the amount you cannot exclude (and must subtract from your total gain when figuring your exclusion) is the amount you actually deducted. You do not have to reduce the gain by any depreciation you deducted (or could have deducted) for a separate structure for which you cannot exclude the allocable portion of the gain. Publication 587 (2011)
Business Furniture and Equipment
This section discusses the depreciation and section 179 deductions you may be entitled to take for furniture and equipment you use in your home for business or work as an employee. These deductions are available whether or not you qualify to deduct expenses for the business use of your home. This section explains the different rules for each of the following.
• Listed property. • Property bought for business use. • Personal property converted to business use.
If you use certain types of property, called listed property, in your home, special rules apply. Listed property includes computers and related equipment and any property of a type generally used for entertainment, recreation, and amusement (including photographic, phonographic, and video recording equipment). Exception for certain use of computers. Computers and related equipment used exclusively in a qualifying office in your home are not listed property. If you qualify to deduct expenses for the business use of your home (see Qualifying for a Deduction, earlier) and you use your computer exclusively in your qualifying office in the home, do not use the listed property rules discussed below. Instead, follow the rules discussed under Property Bought for Business Use, later. More-than-50%-use test. If you bought listed property and placed it in service during the year, you must use it more than 50% for business (including work as an employee) to claim a section 179 deduction or an accelerated depreciation deduction. If your business use of listed property is 50% or less, you cannot take a section 179 deduction and you must depreciate the property using the Alternative Depreciation System (ADS) (straight line method). For more information on ADS, see Publication 946. Listed property meets the more-than-50%-use test for any year if its qualified business use is more than 50% of its total use. You must allocate the use of any item of listed property used for more than one purpose during the year among its various uses. You cannot use the percentage of investment use as part of the percentage of qualified business use to meet the more-than-50%-use test. However, you do use the combined total of business and investment use to figure your depreciation deduction for the property. Example 1. Sarah does not qualify to claim a deduction for the business use of her home, but she uses her home computer 40% of the time for a business she operates out of her home. She also uses the computer 50% of the time to manage her investments. Sarah’s home computer is listed property because it is not used in a qualified office in her home. She does not use the computer more than 50% for business, so she cannot elect a section 179 deduction. She can use her combined business/investment use (90%) to figure her depreciation deduction using ADS. Example 2. If Sarah uses her computer 60% of the time for her business and 30% for managing her investments, her computer meets the more-than-50%-use test. She can elect a section 179 deduction. She can use her combined business/investment use (90%) to figure her depreciation deduction using the General Depreciation System (GDS). Employee. If you use your own listed property (or listed property you rent) in your work as an employee, the property is business-use property only if you meet the following requirements.
• The use is required as a condition of your employment. The use of property as a condition of your employment means that it is necessary for you to properly perform your work. Whether the use of the property is required for this purpose depends on all the facts and circumstances. Your employer does not have to tell you specifically to use the property. Nor is a statement by your employer to that effect sufficient. Years following the year placed in service. If, in a year after you place an item of listed property in service, you fail to meet the more-than-50%-use test for that item of property, you may be required to do the following. 1. Figure depreciation, beginning with the year you no longer use the property more than 50% for business, using the straight line method (ADS). 2. Figure any excess depreciation (include any section 179 deduction on the property in figuring excess depreciation) and add it to: a. Your gross income, and b. The adjusted basis of your property. For more information, see Publication 946. Reporting and recordkeeping requirements. If you use listed property in your business, you must file Form 4562 to claim a depreciation or section 179 deduction. Begin with Part V, Section A, of that form. You cannot take any depreciation or section 179 deduction for the use of listed property unless you RECORDS can prove your business/investment use with adequate records or sufficient evidence to support your own statements. To meet the adequate records requirement, you must maintain an account book, diary, log, statement of expense, trip sheet, or similar record or other documentary evidence that is sufficient to establish business/investment use. For more information on what records to keep, see Publication 946.
Property Bought for Business Use
If you bought certain property during 2011 to use in your business, you can do any one of the following (subject to the limits discussed later).
• Elect a section 179 deduction for the full cost of the
• Depreciate the full cost of the property. • Take part of the cost as a section 179 deduction and
depreciate the balance.
You can claim the section 179 deduction for the cost of depreciable tangible personal property bought for use in Publication 587 (2011)
• The use is for your employer’s convenience.
your trade or business. You can choose how much (subject to the limit) of the cost you want to deduct under section 179 and how much you want to depreciate. You can spread the section 179 deduction over several items of property in any way you choose as long as the total does not exceed the maximum allowable. You cannot take a section 179 deduction for the basis of the business part of your home. You elect the section 179 deduction by completing Part I of Form 4562. More information. For more information on the section 179 deduction, qualifying property, the dollar limit, and the business income limit, see Publication 946 and the Form 4562 instructions.
See Publication 946 for a discussion of the mid-quarter convention and for complete MACRS percentage tables. Example. In June 2011, Donald Kent bought a desk and three chairs for use in his office. His total bill for the furniture was $1,975. His taxable business income for the year was $3,000 without any deduction for the office furniture. Donald can elect to do one of the following.
• Take a section 179 deduction for the full cost of the
office furniture.
• Take part of the cost of the furniture as a section 179
deduction and depreciate the balance.
• Depreciate the full cost of the office furniture.
The furniture is 7-year property under MACRS. Donald does not take a section 179 deduction. He multiplies $1,975 by 14.29% (.1429) to get his MACRS depreciation deduction of $282.23.
Use Parts II and III of Form 4562 to claim your deduction for depreciation on property placed in service during the year. Do not include any costs deducted in Part I (section 179 deduction). Most business property normally used in a home office is either 5-year or 7-year property under MACRS.
Personal Property Converted to Business Use
If you use property in your home office that was used previously for personal purposes, you cannot take a section 179 deduction for the property. You also cannot take a special depreciation allowance for the property. You can depreciate it, however. The method of depreciation you use depends on when you first used the property for personal purposes. If you began using the property for personal purposes after 1986 and change it to business use in 2011, depreciate the property under MACRS. The basis for depreciation of property changed from personal to business use is the lesser of the following.
• 5-year property includes computers and peripheral
equipment, typewriters, calculators, adding machines, and copiers. such as desks, files, and safes.
• 7-year property includes office furniture and fixtures
Under MACRS, you generally use the half-year convention, which allows you to deduct a half-year of depreciation in the first year you use the property in your business. If you place more than 40% of your depreciable property in service during the last 3 months of your tax year, you must use the mid-quarter convention instead of the half-year convention. After you have determined the cost of the depreciable property (minus any section 179 deduction and special depreciation allowance taken on the property) and whether it is 5-year or 7-year property, use the table, shown next, to figure your depreciation if the half-year convention applies.
• The adjusted basis of the property on the date of
change. change.
• The fair market value of the property on the date of
If you began using the property for personal purposes after 1980 and before 1987 and change it to business use in 2011, you generally depreciate the property under the accelerated cost recovery system (ACRS). However, if the depreciation under ACRS is greater in the first year than the depreciation under MACRS, you must depreciate it under MACRS. For information on ACRS, see Publication 534, Depreciating Property Placed in Service Before 1987. If you began using the property for personal purposes before 1981 and change it to business use in 2011, depreciate the property by the straight line or declining balance method based on salvage value and useful life.
Table 4. MACRS Percentage Table for 5- and 7-Year Property Using Half-Year Convention
Recovery Year 1 2 3 4 5 6 7 8 5-Year Property 20.00% 32.00% 19.20% 11.52% 11.52% 5.76% 7-Year Property 14.29% 24.49% 17.49% 12.49% 8.93% 8.92% 8.93% 4.46%
You do not have to use a particular method of recordkeeping, but you must keep records that RECORDS provide the information needed to figure your deductions for the business use of your home. You should keep canceled checks, receipts, and other evidence of expenses you paid. Your records must show the following information.
If you file Schedule F (Form 1040), report your entire deduction for business use of the home (line 33 of the Worksheet To Figure the Deduction for Business Use of Your Home), up to the deduction limit discussed under Figuring the deduction, earlier, on line 32 of Schedule F (Form 1040). Enter “Business Use of Home” on the dotted line beside the entry. Deductible mortgage interest. If you file Schedule C (Form 1040), enter all your deductible mortgage interest on line 10 of Form 8829. After you have figured the business part of the mortgage interest on lines 12 and 13, subtract that amount from the total on line 10. The remainder is deductible on Schedule A (Form 1040), line 10 or 11. If the interest you deduct on Schedule A (Form 1040) for your home mortgage is limited, enter the excess on line 16 of Form 8829. If you file Schedule F (Form 1040), include the business part of your deductible home mortgage interest with your total business use of the home expenses on line 32 of Schedule F (Form 1040). Enter “Business Use of Home” on the dotted line beside the entry. You can use the Worksheet To Figure the Deduction for Business Use of Your Home, later in this publication, to figure the deductible part of mortgage interest. Enter the nonbusiness part of the deductible mortgage interest on Schedule A (Form 1040), line 10 or 11. To determine if the limits on qualified home mortgage interest apply to you, see the Instructions for Schedule A (Form 1040) or Publication 936. Qualified mortgage insurance premiums. If you file Schedule C (Form 1040), enter all your deductible qualified mortgage insurance premiums on line 10 of Form 8829. After you have figured the business part of the qualified mortgage insurance premiums on lines 12 and 13, subtract that amount from the qualified mortgage insurance premiums included on line 10. The remainder is deductible on Schedule A (Form 1040), line 13. If the premiums you deduct on Schedule A (Form 1040) are limited, include the excess with any excess mortgage interest and enter the total on line 16 of Form 8829. If you file Schedule F (Form 1040), include the business part of your deductible qualified mortgage insurance premiums with your total business use of the home expenses on line 32 of Schedule F (Form 1040). Enter “Business Use of Home” on the dotted line beside the entry. You can use the Worksheet To Figure the Deduction for Business Use of Your Home, later in this publication, to figure the deductible part of qualified mortgage insurance premiums. Enter the nonbusiness part of the qualified mortgage insurance premiums on Schedule A (Form 1040), line 13. To determine if the limits on qualified mortgage insurance premiums apply to you, see the Instructions for Schedule A (Form 1040) or Publication 936. Real estate taxes. If you file Schedule C (Form 1040), enter all your deductible real estate taxes on Form 8829, line 11. After you have figured the business part of your taxes on lines 12 and 13, subtract that amount from your total real estate taxes on line 11. The remainder is deductible on Schedule A (Form 1040), line 6. Publication 587 (2011)
• The part of your home you use for business. • That you use part of your home exclusively and
regularly for business as either your principal place of business or as the place where you meet or deal with clients or customers in the normal course of your business. (However, see the earlier discussion, Exceptions to Exclusive Use under Qualifying for a Deduction.) part.
• The depreciation and expenses for the business
You must keep your records for as long as they are important for any tax law. This is usually the later of the following dates.
• 3 years from the return due date or the date filed. • 2 years after the tax was paid.
Keep records to prove your home’s depreciable basis. This includes records of when and how you acquired your home, your original purchase price, any improvements to your home, and any depreciation you are allowed because you maintained an office in your home. You can keep copies of Forms 8829 or the Worksheet To Figure the Deduction for Business Use of Your Home, found later in this publication, as records of depreciation. For more information on recordkeeping, see Publication 583.
Where To Deduct
Deduct expenses for the business use of your home on Form 1040. Where you deduct these expenses on the form depends on whether you are:
• A self-employed person, or • An employee.
If you are a partner, see Partners, later, for information on where to deduct expenses for the business use of your home.
If you are self-employed and file Schedule C (Form 1040), complete and attach Form 8829 to your return. Page 18
If you file Schedule F (Form 1040), include the business part of real estate taxes with your total business use of the home expenses on line 32 of Schedule F (Form 1040). Enter “Business Use of Home” on the dotted line beside the entry. Enter the nonbusiness part of your real estate taxes on line 6 of Schedule A (Form 1040). If you itemize your deductions, be sure to include only the personal part of your deductible mortCAUTION gage interest, qualified mortgage insurance premiums, and real estate taxes on Schedule A (Form 1040). Do not deduct any of the business part on Schedule A (Form 1040). For example, if your business percentage on Form 8829, line 7, or line 3 of the Worksheet To Figure the Deduction for Business Use of Your Home, later, is 30%, you can deduct only 70% of your deductible mortgage interest, qualified mortgage insurance premiums, and real estate taxes as personal expenses on Schedule A (Form 1040).
outside salespersons. If you are a statutory employee, use Schedule C (Form 1040) to claim the expenses. Follow the instructions given earlier under Self-Employed Persons. The statutory employee box within box 13 on your Form W-2, Wage and Tax Statement, will be checked if you are a statutory employee. If you have employee expenses for which you were not reimbursed, report them on Schedule A (Form 1040), line 21. You also generally must complete Form 2106 if either of the following apply.
• You claim any job-related vehicle, travel, transportation, meal, or entertainment expenses.
• Your employer paid you for any of your job expenses
reportable on line 21 of Schedule A (Form 1040). (Amounts your employer included in box 1 of your Form W-2 are not considered paid by your employer.)
Casualty losses. If you are using Form 8829, refer to the specific instructions for line 9 and enter the amount from line 34 of Form 8829 on line 30 of Form 4684, Section B. Enter “See Form 8829” above line 30. If you file Schedule F (Form 1040), enter the business part of casualty losses (line 32 of the Worksheet To Figure the Deduction for Business Use of Your Home) on line 30 of Form 4684, Section B. Enter “See attached statement” above line 30. Other expenses. If you file Schedule C (Form 1040), report the other home expenses that would not be allowable if you did not use your home for business (insurance, maintenance, utilities, depreciation, etc.) on the appropriate lines of your Form 8829. If you rent rather than own your home, report the rent you paid on line 18 of Form 8829. If these expenses exceed the deduction limit, carry the excess over to next year. The carryover will be subject to next year’s deduction limit. If you file Schedule F (Form 1040), include your otherwise nondeductible expenses (insurance, maintenance, utilities, depreciation, etc.) with your total business use of the home expenses on Schedule F (Form 1040), line 32. Enter “Business Use of Home” on the dotted line beside the entry. If these expenses exceed the deduction limit, carry the excess over to the next year. The carryover will be subject to next year’s deduction limit. Business expenses not for the use of your home. Deduct in full your business expenses that are not for the use of your home itself (dues, salaries, supplies, certain telephone expenses, etc.) on the appropriate lines of Schedule C (Form 1040) or Schedule F (Form 1040). These expenses are not for the use of your home, so they are not subject to the deduction limit for business use of the home expenses.
However, you can use the simpler Form 2106-EZ, instead of Form 2106, if you meet the following requirements.
• You were not reimbursed for your expenses by your
employer, or if you were reimbursed, the reimbursement was included in box 1 of your Form W-2. mileage rate.
• If you claim car expenses, you use the standard
When your employer pays for your expenses using a reimbursement or allowance arrangement, the payments generally should not be on your Form W-2 if all the following rules for an accountable plan are met.
• You adequately account to your employer for the
expenses within a reasonable period of time.
• You return any payments not spent for business
expenses (excess reimbursements) within a reasonable period of time. while performing services as an employee.
• You must have paid or incurred deductible expenses
If you meet the accountable plan rules and your business expenses equal your reimbursement, do not report the reimbursement as income and do not deduct the expenses. Adequately accounting to employer. You adequately account to your employer when you give your employer documentary evidence of your travel, mileage, and other employee business expenses, such as receipts, along with an account book, diary, or similar record in which you entered each expense at or near the time you had it. You also may be treated as adequately accounting to your employer if your employer gives you a per diem or car allowance similar in form to, and not more than, the federal rate and you verify the time, place, and business purpose of each expense. For more information, see Publication 463 and the Instructions for Form 2106. Deductible mortgage interest. Although you generally deduct expenses for the business use of your home on Page 19
As an employee, you must itemize deductions on Schedule A (Form 1040) to claim a deduction for the business use of your home and any other employee business expenses. This generally applies to all employees, including Publication 587 (2011)
Schedule A (Form 1040), line 21, unreimbursed employee expenses, do not include any deductible home mortgage interest on that line. Instead, deduct both the business and nonbusiness parts of this interest on line 10 or 11 of Schedule A (Form 1040). If the home mortgage interest you can deduct on lines 10 or 11 is limited by the home mortgage interest rules, you cannot deduct the excess as an employee business expense on Schedule A (Form 1040), line 21, even though you use part of your home for business. To determine if the limits on home mortgage interest apply to you, see Publication 936 or the Instructions for Schedule A (Form 1040). Qualified mortgage insurance premiums. Although you generally deduct expenses for the business use of your home on Schedule A (Form 1040), line 21, do not include any deductible qualified mortgage insurance premiums on that line. Instead, deduct both the business and nonbusiness parts of these premiums on line 13 of Schedule A (Form 1040). If the qualified mortgage insurance premiums you can deduct on line 13 is limited, you cannot deduct the excess as an employee business expense on Schedule A (Form 1040), line 21, even though you use part of your home for business. To determine if you can deduct mortgage insurance premiums and if any limits apply to you, see Publication 936 and Line 13 in the Instructions for Schedule A (Form 1040). Real estate taxes. Deduct both the business and nonbusiness parts of your real estate taxes on line 6 of Schedule A (Form 1040). For more information on amounts allowable as a deduction for real estate taxes, see Publication 530. Casualty losses. Enter the business part of casualty losses (line 32 of the Worksheet To Figure the Deduction for Business Use of Your Home, later) on Form 4684, Section B, line 27. Enter “See attached statement” above line 27. Other expenses. If you file Form 2106 or Form 2106-EZ, report on line 4 the following expenses.
As an employee, you do not have gross receipts, cost of goods sold, etc. You begin with gross income from the business use of your home, which you determine to be $6,000. The percentage of expenses due to the business use of your home is 20%. You have the following expenses.
Deductible mortgage interest (20%) . . . . . . . . . . . . . . . . . Real estate taxes (20%) . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expenses not related to business use of the home (100%): Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Telephone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Otherwise nondeductible expenses: Maintenance (20%) . . . . . . . . . . Utilities (20%) . . . . . . . . . . . . . . Insurance (20%) . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,500 1,000 $2,500 $500 1,300 200 $2,000 $200 350 250 $800 $1,600
Depreciation (20%) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Based on the above expenses, you figure your deduction limit as follows.
Gross income . . . . . . . . . . . . . . . . . . . . . . . . . Less: Deductible mortgage interest (20%) . . . . . . . . . Real estate taxes (20%) . . . . . . . . . . . . . . . . . Expenses not related to business use of the home (100%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deduction limit . . . . . . . . . . . . . . . . . . . . . . . $6,000 $1,500 1,000 2,000 4,500 $1,500
Your deduction for otherwise nondeductible expenses and depreciation is limited to $1,500. You can deduct all your otherwise nondeductible expenses ($800) and $700 ($1,500 − $800) of your depreciation. You deduct your expenses for business use of your home on Schedule A (Form 1040) as shown in the following table.
Expense Deductible mortgage interest Real estate taxes Expenses not related to the business use of the home Otherwise nondeductible expenses Depreciation Amount $1,500 $1,000 $2,000 $800 $700 Schedule A Line 10 or 11* Line 6* Line 21** Line 21** Line 21**
• The business part of your otherwise nondeductible
expenses (utilities, maintenance, insurance, depreciation, etc.) that do not exceed the deduction limit. use of your home, such as advertising.
• The employee business expenses not related to the
Add these to your other employee business expenses and complete the rest of the form. Enter the total from Form 2106, or Form 2106-EZ, on Schedule A (Form 1040), line 21, where it is subject to the 2%-of-adjusted-gross-income limit. If you do not have to file Form 2106 or Form 2106-EZ, enter your total expenses directly on Schedule A (Form 1040), line 21. Example. You are an employee who works at home for the convenience of your employer. You meet all the requirements to deduct expenses for the business use of your home. Your employer does not reimburse you for any of your business expenses and you are not otherwise required to file Form 2106 or Form 2106-EZ. Page 20
*In addition to the 80% nonbusiness part of the expense. **Subject to the 2%-of-adjusted-gross-income limit.
You can carry over the $900 ($1,600 – $700) of depreciation that exceeds the deduction limit to next year, subject to the deduction limit for that year.
You may be allowed to deduct unreimbursed ordinary and necessary expenses you paid on behalf of the partnership (including qualified expenses for the business use of your home) if you were required to pay these expenses under the partnership agreement. Publication 587 (2011)
Use the Worksheet To Figure the Deduction for Business Use of Your Home, near the end of this publication, to figure the deduction for the business use of your home. Deducting unreimbursed partnership expenses. See the following forms and related instructions for information about deducting unreimbursed partnership expenses.
• Schedule E (Form 1040), Supplemental Income and
Part III, line 19i. This is the first year John used his home for business, so he must figure the depreciation on line 19i. On line 19i, column (c), he enters $11,000, the depreciable basis of the business part of his home. He began using his home for business in January of 2011. (For a discussion on how he figures his depreciation deduction, see Step 3 under Form 8829, Part II, later.) He enters $271 on line 19i, column (g). Part IV, line 22. John totals the amounts on line 12 and line 19 in column (g) and enters the total on line 22. He enters both the section 179 deduction ($3,800) and the depreciation on the furniture ($79) on line 13 of Schedule C (Form 1040). He enters the depreciation on his home ($271) on Form 8829, line 29. Schedule C. John completes Schedule C (Form 1040) as follows: Line 13. As discussed previously, John enters the amount from Form 4562 for his section 179 deduction ($3,800 from line 12) and the depreciation deduction for his office furniture ($79 from line 19, column (g)) for a total of $3,879. Line 16b. This amount is the interest on installment payments for the business assets John uses in his home office. Line 25. John had a separate telephone line in his home office that he used only for business. He can deduct $347 for the line. Lines 28-30. On line 28, he totals all his expenses other than those for the business use of his home, and then subtracts that total from his gross income. He uses the result on line 29 to figure the deduction limit on his expenses for the business use of his home. He enters that amount on Form 8829, line 8, and then completes the form. He enters the amount of his home office deduction from Form 8829, line 35, on Schedule C (Form 1040), line 30. Form 8829, Part I. John uses one room of his home exclusively and regularly to meet clients. In Part I of Form 8829 he shows that, based on the square footage, the room is 10% of the total area of his home. Form 8829, Part II. John uses Part II of Form 8829 to figure his allowable home office deduction. Step 1. First, he figures the business part of expenses that would be deductible even if he did not use part of his home for business. These expenses ($4,500 deductible mortgage interest and $1,000 real estate taxes) relate to his entire home, so he enters them in column (b) on lines 10 and 11. He then subtracts the $550 business part of these expenses (line 14) from his tentative business profit (line 8). The result, $25,002 on line 15, is the most he can deduct for his other home office expenses. Step 2. Next, he figures his deduction for operating expenses. He paid $300 to have his office repainted. He enters this amount on line 19, column (a) because it is a direct expense. All his other expenses ($400 homeowner’s Page 21
• Schedule SE (Form 1040), Self-Employment Tax. • Schedule K-1 (Form 1065), Partner’s Share of Income, Credits, Deductions, etc. More information. For more information about partners and partnerships, see Publication 541, Partnerships.
Schedule C Example
The filled-in forms for John Stephens that follow show how to report deductions for the business use of your home if you file Schedule C (Form 1040). Form 4562. Based on the following facts, John completes Form 4562 as follows: Part I, lines 1-13. John began using his home for business in January of this year. He purchased a new computer and filing cabinet to use in his business. The computer, used 100% for business, cost $3,200. The filing cabinet cost $600. John elects to claim the section 179 deduction for both items. John completes Part I of Form 4562. He enters the maximum amount, $500,000, on line 1. John enters the cost of both the computer and filing cabinet, $3,800, on line 2, enters $800,000 on line 3, and completes lines 4 and 5. On line 6, he enters a description of each item, its cost, and the cost he elects to expense. Line 11 is the smaller of line 5 ($500,000) or the taxable income from all trades and businesses without regard to the section 179 deduction. John enters $500,000 on line 5. Since he has no other business income, he adds line 31 of Schedule C (Form 1040) and the amount of the section 179 deduction ($3,800) for a total business income of $27,871. This amount goes on line 11 since it is smaller than $500,000. He enters $3,800 on line 12. Part III, line 19c. John converted to business use a desk and chair (furniture) he had purchased in 2004 for personal purposes. In 2004, he paid $1,500 for them. The total fair market value in 2011 is $550. The fair market value is less than the cost, so his depreciable basis is $550. Because the furniture is 7-year property under MACRS, John enters $550 in Part III, line 19c, column (c) of Form 4562. He completes columns (d) through (f). He uses Table 4 in this publication or Table A-1 in Publication 946 to find the rate of 14.29% for property placed in service during the first month of the year. He multiplies $550 by 14.29% (.1429) and enters $79 in column (g). Publication 587 (2011)
insurance, $1,400 roof repairs, and $1,800 gas and electric) relate to his entire home. Therefore, he enters them in column (b) on the appropriate lines as indirect expenses. He adds the $300 direct expenses (line 22, column (a)) to the $360 total for indirect expenses (line 23) and enters the total, $660, on line 25. This amount is less than his deduction limit, so he can deduct it in full. The $24,342 balance of his deduction limit (line 27) is the most he can deduct for depreciation. Step 3. Next, he figures his allowable depreciation deduction for the business use of his home in Part III of Form 8829. The adjusted basis of his home is $130,000, which is less than the fair market value of $160,000. He figures the value of the land to be $20,000. He subtracts the land value from the adjusted basis. He multiplies the result ($110,000) by the percentage on line 7 to get the depreciable basis of the business part of his home ($11,000). He began using the office in January, so he uses Table 2 in this publication or Table A-7a in Appendix A of Publication 946. The depreciation percentage for the first year of
the recovery period for assets placed in service in the first month is 2.461%. His depreciation deduction for 2011 (line 41) is $271 (.02461 × $11,000). He enters that amount in Part II on lines 29 and 31. This is less than the available balance of his deduction limit (line 27), so he can deduct the full amount as depreciation. John also must complete Form 4562 for 2011, so he enters $271 on line 19i, column (g) of Form 4562. See Part III, line 19i under Form 4562, earlier. Step 4. Finally, he figures his total deduction for his home office by adding together his otherwise deductible expenses (line 14), his operating expenses (line 26), and depreciation (line 32). He enters the result, $1,481, on lines 33 and 35, and on Schedule C (Form 1040), line 30.
Department of the Treasury Internal Revenue Service (99) Name of proprietor
▶ For ▶ Attach
Proﬁt or Loss From Business
(Sole Proprietorship)
information on Schedule C and its instructions, go to www.irs.gov/schedulec
to Form 1040, 1040NR, or 1041; partnerships generally must ﬁle Form 1065.
Attachment Sequence No. 09
465-00-0001
B Enter code from instructions
Principal business or profession, including product or service (see instructions) Business name. If no separate business name, leave blank. Business address (including suite or room no.)
D Employer ID number (EIN), (see instr.)
Stephens Tax Service
Hometown, IA 52761 City, town or post office, state, and ZIP code (2) Accrual (3) Other (specify) ▶ Accounting method: (1)  Cash Did you “materially participate” in the operation of this business during 2011? If “No,” see instructions for limit on losses
If you started or acquired this business during 2011, check here . If "Yes," did you or will you file all required Forms 1099? . . . . . . . . . . . . . 1a 1b 1c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Did you make any payments in 2011 that would require you to file Form(s) 1099? (see instructions) .
821 Union Street
▶ 
. . 
1a b c d 2 3 4 5 6 7 8 9 10 11 12 13
Income 34,280 34,280 34,280 34,280 34,280 600
Merchant card and third party payments. For 2011, enter -0- . . . Gross receipts or sales not entered on line 1a (see instructions)
Income reported to you on Form W-2 if the “Statutory Employee” box on that form was checked. Caution. See instr. before completing this line Total gross receipts. Add lines 1a through 1c . . . . . . . . Returns and allowances plus any other adjustments (see instructions) Subtract line 2 from line 1d . . . . . . . . . . . . . . .
1d 2 3 4 5 6 7
Cost of goods sold (from line 42) . . . . . . . . . . . . . . . . . . . Gross proﬁt. Subtract line 4 from line 3 . . . . . . . . . . . . . . . . . Other income, including federal and state gasoline or fuel tax credit or refund (see instructions) . Gross income. Add lines 5 and 6 . . . . . . . . . . . . . . . . . . .
. . . . 8 9 10 11 12
Enter expenses for business use of your home only on line 30. 250 18 Office expense (see instructions) 18 1,266
19 20 a b 21 22 Pension and profit-sharing plans . Rent or lease (see instructions): Vehicles, machinery, and equipment Other business property . . . Repairs and maintenance . . . Supplies (not included in Part III) . Taxes and licenses . . . . . Travel, meals, and entertainment: Travel . . . . . . . . . Deductible meals and entertainment (see instructions) Utilities . . . . . . . . . 19 20a 20b 21 22 23 24a 24b 25 26 27a 27b 28 29 30
Car and truck expenses (see instructions) . . . . . Commissions and fees . Contract labor (see instructions) Depletion . . . . . Depreciation and section 179 expense deduction (not included in Part III) (see instructions) . . . . . Employee benefit programs (other than on line 19) . . Insurance (other than health)
253 310 256 347 267 8,728 25,552 1,481 24,071
13 14 15 16a 16b 17
3,879 750 200 350
23 24 a b 25 26 27a b
14 15 16 a b 17 28 29 30 31
Interest: Mortgage (paid to banks, etc.) Other . . . . . . Legal and professional services
Wages (less employment credits) . Other expenses (from line 48) . . Reserved for future use . . . . . . . .
Total expenses before expenses for business use of home. Add lines 8 through 27a .
Tentative profit or (loss). Subtract line 28 from line 7 . . . . . . . . . . . . . . . . Expenses for business use of your home. Attach Form 8829. Do not report such expenses elsewhere . Net proﬁt or (loss). Subtract line 30 from line 29. • If a profit, enter on both Form 1040, line 12 (or Form 1040NR, line 13) and on Schedule SE, line 2. If you entered an amount on line 1c, see instr. Estates and trusts, enter on Form 1041, line 3. • If a loss, you must go to line 32.
If you have a loss, check the box that describes your investment in this activity (see instructions). • If you checked 32a, enter the loss on both Form 1040, line 12, (or Form 1040NR, line 13) and on Schedule SE, line 2. If you entered an amount on line 1c, see the instructions for line 31. Estates and trusts, enter on Form 1041, line 3.
• If you checked 32b, you must attach Form 6198. Your loss may be limited. For Paperwork Reduction Act Notice, see your tax return instructions.
32a 32b
All investment is at risk. Some investment is not at risk.
Schedule C (Form 1040) 2011
Cat. No. 11334P
John Stephens Part I Part of Your Home Used for Business
1 Area used regularly and exclusively for business, regularly for daycare, or for storage of inventory or product samples (see instructions) . . . . . . . . . . . . . . . . 2 Total area of home . . . . . . . . . . . . . . . . . . . . . . . . . 3 Divide line 1 by line 2. Enter the result as a percentage . . . . . . . . . . . . . For daycare facilities not used exclusively for business, go to line 4. All others go to line 7. hr. 4 4 Multiply days used for daycare during year by hours used per day 8,760 hr. 5 Total hours available for use during the year (365 days x 24 hours) (see instructions) 5 . 6 6 Divide line 4 by line 5. Enter the result as a decimal amount . . . 7 Business percentage. For daycare facilities not used exclusively for business, multiply line 6 by line 3 (enter the result as a percentage). All others, enter the amount from line 3 . . . . . ▶ 1 2 3
465-00-0001 200 2,000 10 %
Figure Your Allowable Deduction
8 Enter the amount from Schedule C, line 29, plus any gain derived from the business use of your home and shown on Schedule D or Form 4797, minus any loss from the trade or business not derived from the business use of your home and shown on Schedule D or Form 4797. See instructions . . 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 Casualty losses (see instructions) . . . . . 9 10 Deductible mortgage interest (see instructions) 4,500 11 Real estate taxes (see instructions) . . . . 1,000 5,500 12 Add lines 9, 10, and 11 . . . . . . . . 13 Multiply line 12, column (b) by line 7 . . . . 550 Add line 12, column (a) and line 13 . . . . Subtract line 14 from line 8. If zero or less, enter -0Excess mortgage interest (see instructions) . 16 Insurance . . . . . . . . . . . . 17 400 Rent . . . . . . . . . . . . . . 18 Repairs and maintenance . . . . . . . 19 300 1,400 20 Utilities . . . . . . . . . . . . . 1,800 Other expenses (see instructions). . . . . 21 Add lines 16 through 21 . . . . . . . . 22 300 3,600 360 Multiply line 22, column (b) by line 7 . . . . . . . . . . . 23 -0Carryover of operating expenses from 2010 Form 8829, line 42 . . 24 Add line 22 column (a), line 23, and line 24. . . . . . . . . . . . . . . . . . Allowable operating expenses. Enter the smaller of line 15 or line 25 . . . . . . . . . Limit on excess casualty losses and depreciation. Subtract line 26 from line 15 . . . . . Excess casualty losses (see instructions) . . . . . . . . . 28 271 Depreciation of your home from line 41 below . . . . . . . 29 Carryover of excess casualty losses and depreciation from 2010 Form 8829, line 43 30 Add lines 28 through 30 . . . . . . . . . . . . . . . . . . . . . . . . Allowable excess casualty losses and depreciation. Enter the smaller of line 27 or line 31 . . Add lines 14, 26, and 32. . . . . . . . . . . . . . . . . . . . . . . . Casualty loss portion, if any, from lines 14 and 32. Carry amount to Form 4684 (see instructions) Allowable expenses for business use of your home. Subtract line 34 from line 33. Enter here and on Schedule C, line 30. If your home was used for more than one business, see instructions ▶
550 25,002
660 660 24,342
271 271 1,481 1,481 130,000 20,000 110,000 11,000 2.461 271
(Including Information on Listed Property)
▶ See
OMB No. 1545-0172
Department of the Treasury Internal Revenue Service (99)
separate instructions.
▶ Attach
to your tax return.
Attachment Sequence No. 179 Identifying number
Name(s) shown on return
Business or activity to which this form relates
John Stephens Tax Preparation Part I Election To Expense Certain Property Under Section 179 Note: If you have any listed property, complete Part V before you complete Part I.
1 2 3 4 5 6 Maximum amount (see instructions) . . . . . . . . . . . . . . . . . . Total cost of section 179 property placed in service (see instructions) . . . . . . Threshold cost of section 179 property before reduction in limitation (see instructions) . Reduction in limitation. Subtract line 3 from line 2. If zero or less, enter -0- . . . . . Dollar limitation for tax year. Subtract line 4 from line 1. If zero or less, enter -0-. If separately, see instructions . . . . . . . . . . . . . . . . . . . .
(a) Description of property (b) Cost (business use only)
. . . . . . . . filing . . 1 2 3 4 5
. . . . . . . . . . . . married . . .
500,000 3,800 800,000 -0500,000
(c) Elected cost
Computer File Cabinet
3,200 600
7 Listed property. Enter the amount from line 29 . . . . . . . . . 7 8 Total elected cost of section 179 property. Add amounts in column (c), lines 6 and 7 . . . . . . 9 Tentative deduction. Enter the smaller of line 5 or line 8 . . . . . . . . . . . . . . . . 10 Carryover of disallowed deduction from line 13 of your 2010 Form 4562 . . . . . . . . . . . 11 Business income limitation. Enter the smaller of business income (not less than zero) or line 5 (see instructions) 12 Section 179 expense deduction. Add lines 9 and 10, but do not enter more than line 11 . . . . . 13 13 Carryover of disallowed deduction to 2012. Add lines 9 and 10, less line 12 ▶ Note: Do not use Part II or Part III below for listed property. Instead, use Part V.
3,800 3,800 -027,871 3,800
Special Depreciation Allowance and Other Depreciation (Do not include listed property.) (See instructions.)
14 Special depreciation allowance for qualified property (other than listed property) placed in service during the tax year (see instructions) . . . . . . . . . . . . . . . . . . . . . . 15 Property subject to section 168(f)(1) election . 16 Other depreciation (including ACRS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Part III MACRS Depreciation (Do not include listed property.) (See instructions.)
Section A 17 17 MACRS deductions for assets placed in service in tax years beginning before 2011 . . . . . . . 18 If you are electing to group any assets placed in service during the tax year into one or more general asset accounts, check here . . . . . . . . . . . . . . . . . . . . ▶ Section B—Assets Placed in Service During 2011 Tax Year Using the General Depreciation System
(a) Classification of property (b) Month and year placed in service (c) Basis for depreciation (business/investment use only—see instructions) (d) Recovery period (e) Convention (f) Method (g) Depreciation deduction
19a b c d e f g h i
20a b c
Part IV Summary (See instructions.)
3-year property 5-year property 7-year property HY 200DB 7 550 10-year property 15-year property 20-year property 25-year property 25 yrs. S/L Residential rental 27.5 yrs. MM S/L property 27.5 yrs. MM S/L Nonresidential real 39 yrs. MM 11,000 S/L property MM S/L Section C—Assets Placed in Service During 2011 Tax Year Using the Alternative Depreciation System S/L Class life 12 yrs. S/L 12-year 40 yrs. S/L MM 40-year 21 22
21 Listed property. Enter amount from line 28 . . . . . . . . . . . . . . . . . . . . 22 Total. Add amounts from line 12, lines 14 through 17, lines 19 and 20 in column (g), and line 21. Enter here
and on the appropriate lines of your return. Partnerships and S corporations—see instructions . . . . .
23 For assets shown above and placed in service during the current year, enter the portion of the basis attributable to section 263A costs . . . . . . .
For Paperwork Reduction Act Notice, see separate instructions.
Form 4562 (2011)
Cat. No. 12906N
Worksheet To Figure the Deduction for Business Use of Your Home Use this worksheet if you file Schedule F (Form 1040) or you are an employee or a partner. Keep for Your Records
PART 1 — Part of Your Home Used for Business: 1) Area of home used for business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2) Total area of home . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3) Percentage of home used for business (divide line 1 by line 2 and show result as percentage) . . . . . PART 2 — Figure Your Allowable Deduction 4) Gross income from business (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (a) (b) Direct Indirect Expenses Expenses 5) Casualty losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5) 6) Deductible mortgage interest and qualified mortgage insurance premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6) 7) Real estate taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7) 8) Total of lines 5 through 7 . . . . . . . . . . . . . . . . . . . . . . . . . . 8) 9) Multiply line 8, column (b), by line 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9) 10) Add line 8, column (a), and line 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10) 11) Business expenses not from business use of home (see instructions) . . . . . . . . 11) 12) Add lines 10 and 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13) Deduction limit. Subtract line 12 from line 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14) Excess mortgage interest and qualified mortgage insurance premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16) Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17) Repairs and maintenance . . . . . . . . . . . . . . . . . . . . . . . . 18) Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19) Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20) Add lines 14 through 19 . . . . . . . . . . . . . . . . . . . . . . . . . . 21) 22) 23) 24) 25) 26) 27) 28) 29) 30) 31) 32) 33) . . . . . . . 14) 15) 16) 17) 18) 19) 20)
Multiply line 20, column (b) by line 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21) Carryover of operating expenses from prior year (see instructions) . . . . . . . . . . 22) Add line 20, column (a), line 21, and line 22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Allowable operating expenses. Enter the smaller of line 13 or line 23 . . . . . . . . . . . . . . . . . . . . . . Limit on excess casualty losses and depreciation. Subtract line 24 from line 13 . . . . . . . . . . . . . . . Excess casualty losses (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26) Depreciation of your home from line 39 below . . . . . . . . . . . . . . . . . . . . . . . . . 27) Carryover of excess casualty losses and depreciation from prior year (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28) Add lines 26 through 28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Allowable excess casualty losses and depreciation. Enter the smaller of line 25 or line 29 . . . . . . . Add lines 10, 24, and 30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Casualty losses included on lines 10 and 30 (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . Allowable expenses for business use of your home. (Subtract line 32 from line 31.) See instructions for where to enter on your return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23) 24) 25)
29) 30) 31) 32) 33) 34) 35) 36) 37) 38) 39) 40) 41)
PART 3 — Depreciation of Your Home 34) Smaller of adjusted basis or fair market value of home (see instructions) 35) Basis of land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36) Basis of building (subtract line 35 from line 34) . . . . . . . . . . . . . . . . . . 37) Business basis of building (multiply line 36 by line 3) . . . . . . . . . . . . . . 38) Depreciation percentage (from applicable table or method) . . . . . . . . . . 39) Depreciation allowable (multiply line 37 by line 38) . . . . . . . . . . . . . . . .
PART 4 — Carryover of Unallowed Expenses to Next Year 40) Operating expenses. Subtract line 24 from line 23. If less than zero, enter -0- . . . . . . . . . . . . . . . . . 41) Excess casualty losses and depreciation. Subtract line 30 from line 29. If less than zero, enter -0- . .
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. The following instructions explain how to complete each part of the worksheet. Partners. See Partners under Where To Deduct, earlier, before completing the worksheet.
If you file Schedule C (Form 1040), use Form 8829 to figure the deductions and attach the form to your return.
Part 1—Part of Your Home Used for Business
Lines 1-3. If you figure the percentage based on area, use lines 1 through 3 to figure the business-use percentage. Enter the percentage on line 3. You can use any other reasonable method that accurately reflects your business-use percentage. If you operate a daycare facility and you meet the exception to the exclusive use test for part or all of the area you use for business, you must figure the business-use percentage for that area as explained under Daycare Facility, earlier. If you use another method to figure your business percentage, skip lines 1 and 2 and enter the percentage on line 3.
home and the deductions attributable to that income. Include on line 6 the amount from Schedule A (Form 1040), line 13. See lines 14-22, later, to deduct part of the qualified mortgage insurance premiums not allowed because of the adjusted gross income limit. Do not file or use that Schedule A (Form 1040) to figure the amount to deduct on line 13 of that schedule. Instead, complete a separate Schedule A (Form 1040) to deduct the personal portion of your qualified mortgage insurance premiums. Under column (a), Direct Expenses, enter expenses that benefit only the business part of your home. Under column (b), Indirect Expenses, enter expenses that benefit the entire home. You generally enter 100% of the expense. However, if the business percentage of an indirect expense is different from the percentage on line 3, enter only the business part of the expense on the appropriate line in column (a), and leave that line in column (b) blank. Lines 9-10. Multiply your total indirect expenses (line 8, column (b)) by the business percentage from line 3. Enter the result on line 9. Add this amount to the total direct expenses (line 8, column (a)) and enter the total on line 10. Lines 11-13. Enter any other business expenses that are not attributable to business use of the home on line 11. For employees, examples include travel, supplies, and business telephone expenses. Farmers generally should enter their total farm expenses before deducting office in the home expenses. Do not enter the deduction for one-half of your self-employment tax. Add the amounts on lines 10 and 11, and enter the total on line 12. Subtract line 12 from line 4, and enter the result on line 13. This is your deduction limit. You use it to determine whether you can deduct any of your other expenses for business use of the home this year. If you cannot, you will carry them over to next year. If line 13 is zero or less, enter zero. Deduct your expenses for deductible home mortgage interest, qualified mortgage insurance premiums, real estate taxes, casualty losses, and any business expenses not attributable to use of your home on the appropriate lines of the schedule(s) for Form 1040 as explained earlier under Where To Deduct. Lines 14-22. On lines 14 through 19, enter your otherwise nondeductible expenses for the business use of your home. These include utilities, insurance, repairs, and maintenance. If you rent, report the amount paid on line 16. If you file Schedule F (Form 1040), include any part of your home mortgage interest or qualified mortgage insurance premiums that is more than the limits given in Publication 936. (If you are an employee, do not enter any excess home mortgage interest or qualified mortgage insurance premiums.) In column (a), enter the expenses that benefit only the business part of your home (direct expenses). In column (b), enter the expenses that benefit the entire home (indirect expenses). Multiply line 20, column (b) by the business-use percentage (line 3) and enter this amount on line 21. If you claimed a deduction for business use of your home on your 2010 tax return, enter the amount from line 40 of your 2010 worksheet on line 22. Page 27
Part 2—Figure Your Allowable Deduction
Line 4. If you file Schedule F (Form 1040), enter your total gross income that is related to the business use of your home. This generally would be the amount on line 9 of Schedule F (Form 1040). If you are an employee, enter your total wages that are related to the business use of your home. Lines 5-7. Enter only the amounts that would be deductible whether or not you used your home for business (that is, amounts allowable as itemized deductions on Schedule A (Form 1040), or amounts for real estate taxes and net disaster loss by which you can increase your standard deduction). Generally (disaster) waivers include only the part of a casualty loss that exceeds $100 plus 10% of adjusted gross income. If you file Schedule F (Form 1040) or are a partner, treat qualified mortgage insurance premiums as personal expenses for this step. Figure the amount to include on line 6 by completing Schedule A (Form 1040), line 13, in accordance with the instructions for line 13 in the Schedule A (Form 1040) Instructions. However, when figuring your adjusted gross income (Form 1040, line 38) for this purpose, exclude the gross income from business use of your Publication 587 (2011)
Lines 25-30. On lines 25 through 30, figure your limit on deductions for excess casualty losses and depreciation. On line 26, figure the excess casualty loss by multiplying the business use percentage from line 3 by the part of casualty losses that would not be allowable if you did not use your home for business (i.e., the casualty losses in excess of the amount on line 5). On line 27, enter the depreciation deduction from Part 3. If you claimed a deduction for business use of your home on your 2010 tax return, enter on line 28 the amount from line 41 of your 2010 worksheet. On lines 29 and 30, figure your allowable excess casualty losses and depreciation. Lines 31-33. On line 31, total all allowable business use of the home deductions. On line 32, enter the total of the casualty losses shown on lines 10 and 30. Enter the amount from line 32 on line 27 of Form 4684, Section B and enter “See Form 4684” above line 27. See the Instructions for Form 4684 for more information on completing that form. Line 33 is the total (other than casualty losses) allowable as a deduction for business use of your home. If you file Schedule F (Form 1040), enter this amount on line 32, Other expenses, of Schedule F (Form 1040) and enter “Business Use of Home” on the line beside the entry. Do not add the specific expenses into other line totals of Part II of Schedule F (Form 1040). If you are an employee or partner, see Where To Deduct, earlier, for information on how to claim the deduction.
You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get information from the IRS in several ways. By selecting the method that is best for you, you will have quick and easy access to tax help. Free help with your return. Free help in preparing your return is available nationwide from IRS-certified volunteers. The Volunteer Income Tax Assistance (VITA) program is designed to help low-moderate income taxpayers and the Tax Counseling for the Elderly (TCE) program is designed to assist taxpayers age 60 and older with their tax returns. Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. To find the nearest VITA or TCE site, visit IRS.gov or call 1-800-906-9887 or 1-800-829-1040. As part of the TCE program, AARP offers the Tax-Aide counseling program. To find the nearest AARP Tax-Aide site, call 1-888-227-7669 or visit AARP’s website at www. aarp.org/money/taxaide. For more information on these programs, go to IRS.gov and enter keyword “VITA” in the upper right-hand corner. Internet. You can access the IRS website at IRS.gov 24 hours a day, 7 days a week to:
• Check the status of your 2011 refund. Go to IRS.gov
and click on Where’s My Refund. Wait at least 72 hours after the IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after mailing a paper return. If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). Have your 2011 tax return available so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. preparation and e-file services available free to eligible taxpayers. tions, and publications.
Part 3—Depreciation of Your Home
Figure your depreciation deduction on lines 34 through 39. On line 34, enter the smaller of the adjusted basis or the fair market value of the property at the time you first used it for business. Do not adjust this amount for changes in basis or value after that date. Allocate the basis between the land and the building on lines 35 and 36. You cannot depreciate any part of the land. On line 38, enter the correct percentage for the current year from the tables in Publication 946. Multiply this percentage by the business basis to get the depreciation deduction. Enter this figure on lines 39 and 27. Complete and attach Form 4562 to your return if this is the first year you used your home, or an improvement or addition to your home, in business.
• E-file your return. Find out about commercial tax
• Download forms, including talking tax forms, instruc• • • •
Order IRS products online. Research your tax questions online. Search publications online by topic or keyword. Use the online Internal Revenue Code, regulations, or other official guidance. the last few years.
Part 4—Carryover of Unallowed Expenses to Next Year
Complete these lines to figure the expenses that must be carried forward to next year.
• View Internal Revenue Bulletins (IRBs) published in • Figure your withholding allowances using the withholding calculator online at www.irs.gov/individuals.
• Determine if Form 6251 must be filed by using our • Sign up to receive local and national tax news by
Alternative Minimum Tax (AMT) Assistant available online at www.irs.gov/individuals.
telephone calls. Another is to ask some callers to complete a short survey at the end of the call. Walk-in. Many products and services are available on a walk-in basis.
• Get information on starting and operating a small
• Products. You can walk in to many post offices,
Phone. Many services are available by phone.
• Ordering forms, instructions, and publications. Call
1-800-TAX-FORM (1-800-829-3676) to order current-year forms, instructions, and publications, and prior-year forms and instructions. You should receive your order within 10 days. questions at 1-800-829-1040.
libraries, and IRS offices to pick up certain forms, instructions, and publications. Some IRS offices, libraries, grocery stores, copy centers, city and county government offices, credit unions, and office supply stores have a collection of products available to print from a CD or photocopy from reproducible proofs. Also, some IRS offices and libraries have the Internal Revenue Code, regulations, Internal Revenue Bulletins, and Cumulative Bulletins available for research purposes. Assistance Center every business day for personal, face-to-face tax help. An employee can explain IRS letters, request adjustments to your tax account, or help you set up a payment plan. If you need to resolve a tax problem, have questions about how the tax law applies to your individual tax return, or you are more comfortable talking with someone in person, visit your local Taxpayer Assistance Center where you can spread out your records and talk with an IRS representative face-to-face. No appointment is necessary —just walk in. If you prefer, you can call your local Center and leave a message requesting an appointment to resolve a tax account issue. A representative will call you back within 2 business days to schedule an in-person appointment at your convenience. If you have an ongoing, complex tax account problem or a special need, such as a disability, an appointment can be requested. All other issues will be handled without an appointment. To find the number of your local office, go to www.irs. gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service.
• Services. You can walk in to your local Taxpayer
• Asking tax questions. Call the IRS with your tax • Solving problems. You can get face-to-face help
solving tax problems every business day in IRS Taxpayer Assistance Centers. An employee can explain IRS letters, request adjustments to your account, or help you set up a payment plan. Call your local Taxpayer Assistance Center for an appointment. To find the number, go to www.irs.gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service. TDD equipment, call 1-800-829-4059 to ask tax questions or to order forms and publications.
• TTY/TDD equipment. If you have access to TTY/ • TeleTax topics. Call 1-800-829-4477 to listen to
pre-recorded messages covering various tax topics. 2011 refund, call 1-800-829-1954 or 1-800-829-4477 (automated refund information 24 hours a day, 7 days a week). Wait at least 72 hours after the IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after mailing a paper return. If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). Have your 2011 tax return available so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. If you check the status of your refund and are not given the date it will be issued, please wait until the next week before checking back. prior-year refund or amended return refund, call 1-800-829-1040.
• Refund information. To check the status of your
Mail. You can send your order for forms, instructions, and publications to the address below. You should receive a response within 10 days after your request is received. Internal Revenue Service 1201 N. Mitsubishi Motorway Bloomington, IL 61705-6613 Taxpayer Advocate Service. The Taxpayer Advocate Service (TAS) is your voice at the IRS. Our job is to ensure that every taxpayer is treated fairly, and that you know and understand your rights. We offer free help to guide you through the often-confusing process of resolving tax problems that you haven’t been able to solve on your own. Remember, the worst thing you can do is nothing at all. TAS can help if you can’t resolve your problem with the IRS and: Page 29
• Other refund information. To check the status of a
Evaluating the quality of our telephone services. To ensure IRS representatives give accurate, courteous, and professional answers, we use several methods to evaluate the quality of our telephone services. One method is for a second IRS representative to listen in on or record random Publication 587 (2011)
• Your problem is causing financial difficulties for you,
your family, or your business. threat of adverse action.
• You face (or your business is facing) an immediate • You have tried repeatedly to contact the IRS but no
one has responded, or the IRS has not responded to you by the date promised.
If you qualify for our help, we’ll do everything we can to get your problem resolved. You will be assigned to one advocate who will be with you at every turn. We have offices in every state, the District of Columbia, and Puerto Rico. Although TAS is independent within the IRS, our advocates know how to work with the IRS to get your problems resolved. And our services are always free. As a taxpayer, you have rights that the IRS must abide by in its dealings with you. Our tax toolkit at www. TaxpayerAdvocate.irs.gov can help you understand these rights. If you think TAS might be able to help you, call your local advocate, whose number is in your phone book and on our website at www.irs.gov/advocate. You can also call our toll-free number at 1-877-777-4778 or TTY/TDD 1-800-829-4059. TAS also handles large-scale or systemic problems that affect many taxpayers. If you know of one of these broad issues, please report it to us through our Systemic Advocacy Management System at www.irs.gov/advocate. Low Income Taxpayer Clinics (LITCs). Low Income Taxpayer Clinics (LITCs) are independent from the IRS. Some clinics serve individuals whose income is below a certain level and who need to resolve a tax problem. These clinics provide professional representation before the IRS or in court on audits, appeals, tax collection disputes, and other issues for free or for a small fee. Some clinics can provide information about taxpayer rights and responsibilities in many different languages for individuals who speak English as a second language. For more information and to find a clinic near you, see the LITC page on www.irs.gov/ advocate or IRS Publication 4134, Low Income Taxpayer Clinic List. This publication is also available by calling 1-800-829-3676 or at your local IRS office. Free tax services. Publication 910, IRS Guide to Free Tax Services, is your guide to IRS services and resources.
Learn about free tax information from the IRS, including publications, services, and education and assistance programs. The publication also has an index of over 100 TeleTax topics (recorded tax information) you can listen to on the telephone. The majority of the information and services listed in this publication are available to you free of charge. If there is a fee associated with a resource or service, it is listed in the publication. Accessible versions of IRS published products are available on request in a variety of alternative formats for people with disabilities. DVD for tax products. You can order Publication 1796, IRS Tax Products DVD, and obtain:
Current-year forms, instructions, and publications. Prior-year forms, instructions, and publications. Tax Map: an electronic research tool and finding aid. Tax law frequently asked questions. Tax Topics from the IRS telephone response system.
• Internal Revenue Code—Title 26 of the U.S. Code. • Links to other Internet based Tax Research materials.
Fill-in, print, and save features for most tax forms. Internal Revenue Bulletins. Toll-free and email technical support. Two releases during the year. – The first release will ship the beginning of January 2012. – The final release will ship the beginning of March 2012.
Purchase the DVD from National Technical Information Service (NTIS) at www.irs.gov/cdorders for $30 (no handling fee) or call 1-877-233-6767 toll free to buy the DVD for $30 (plus a $6 handling fee).
Exhibit A. Family Daycare Provider Meal and Snack Log
TIN/SSN _____________
Name of Provider _______________________________
Week of _____________________________ Keep For Your Records Tuesday Hours of attendance: _____ Ⅺ Bkfst Ⅺ Snack Ⅺ Lunch Ⅺ Snack Ⅺ Dinner Ⅺ Snack Hours of attendance: _____ Ⅺ Bkfst Ⅺ Snack Ⅺ Lunch Ⅺ Snack Ⅺ Dinner Ⅺ Snack Hours of attendance: _____ Ⅺ Bkfst Ⅺ Snack Ⅺ Lunch Ⅺ Snack Ⅺ Dinner Ⅺ Snack Hours of attendance: _____ Ⅺ Bkfst Ⅺ Snack Ⅺ Lunch Ⅺ Snack Ⅺ Dinner Ⅺ Snack Hours of attendance: _____ Ⅺ Bkfst Ⅺ Snack Ⅺ Lunch Ⅺ Snack Ⅺ Dinner Ⅺ Snack Hours of attendance: _____ Ⅺ Bkfst Ⅺ Snack Ⅺ Lunch Ⅺ Snack Ⅺ Dinner Ⅺ Snack Hours of attendance: _____ Ⅺ Bkfst Ⅺ Snack Ⅺ Lunch Ⅺ Snack Ⅺ Dinner Ⅺ Snack Hours of attendance: _____ Ⅺ Bkfst Ⅺ Snack Ⅺ Lunch Ⅺ Snack Ⅺ Dinner Ⅺ Snack Hours of attendance: _____ Ⅺ Bkfst Ⅺ Snack Ⅺ Lunch Ⅺ Snack Ⅺ Dinner Ⅺ Snack Hours of attendance: _____ Ⅺ Bkfst Ⅺ Snack Ⅺ Lunch Ⅺ Snack Ⅺ Dinner Ⅺ Snack Hours of attendance: _____ Ⅺ Bkfst Ⅺ Snack Ⅺ Lunch Ⅺ Snack Ⅺ Dinner Ⅺ Snack Hours of attendance: _____ Ⅺ Bkfst Ⅺ Snack Ⅺ Lunch Ⅺ Snack Ⅺ Dinner Ⅺ Snack Hours of attendance: _____ Ⅺ Bkfst Ⅺ Snack Ⅺ Lunch Ⅺ Snack Ⅺ Dinner Ⅺ Snack Hours of attendance: _____ Ⅺ Bkfst Ⅺ Snack Ⅺ Lunch Ⅺ Snack Ⅺ Dinner Ⅺ Snack Hours of attendance: _____ Ⅺ Bkfst Ⅺ Snack Ⅺ Lunch Ⅺ Snack Ⅺ Dinner Ⅺ Snack Hours of attendance: _____ Ⅺ Bkfst Ⅺ Snack Ⅺ Lunch Ⅺ Snack Ⅺ Dinner Ⅺ Snack Hours of attendance: _____ Ⅺ Bkfst Ⅺ Snack Ⅺ Lunch Ⅺ Snack Ⅺ Dinner Ⅺ Snack Hours of attendance: _____ Ⅺ Bkfst Ⅺ Snack Ⅺ Lunch Ⅺ Snack Ⅺ Dinner Ⅺ Snack Hours of attendance: _____ Ⅺ Bkfst Ⅺ Snack Ⅺ Lunch Ⅺ Snack Ⅺ Dinner Ⅺ Snack Hours of attendance: _____ Ⅺ Bkfst Ⅺ Snack Ⅺ Lunch Ⅺ Snack Ⅺ Dinner Ⅺ Snack Hours of attendance: _____ Ⅺ Bkfst Ⅺ Snack Ⅺ Lunch Ⅺ Snack Ⅺ Dinner Ⅺ Snack Hours of attendance: _____ Ⅺ Bkfst Ⅺ Snack Ⅺ Lunch Ⅺ Snack Ⅺ Dinner Ⅺ Snack Hours of attendance: _____ Ⅺ Bkfst Ⅺ Snack Ⅺ Lunch Ⅺ Snack Ⅺ Dinner Ⅺ Snack Hours of attendance: _____ Ⅺ Bkfst Ⅺ Snack Ⅺ Lunch Ⅺ Snack Ⅺ Dinner Ⅺ Snack Wednesday Thursday Friday Saturday Sunday Totals Number served: _____ Breakfasts: _____ Lunches: _____ Dinners: ______ Snacks: ______ Number served: _____ Breakfasts: _____ Lunches: _____ Dinners: _____ Snacks: _____ Number served: _____ Breakfasts: _____ Lunches: _____ Dinners: _____ Snacks: _____ Number served: _____ Breakfasts: _____ Lunches: _____ Dinners: _____ Snacks: _____
Hours of attendance: _____ Ⅺ Bkfst Ⅺ Snack Ⅺ Lunch Ⅺ Snack Ⅺ Dinner Ⅺ Snack
To help us develop a more useful index, please let us know if you have ideas for index entries. See “Comments and Suggestions” in the “Introduction” for the ways you can reach us.
Adjusted basis defined . . . . . . . . . . 10 Administrative or management activities . . . . . . . . . . . . . . . . . . . . . . . . 4 Assistance (See Tax help) Attorneys . . . . . . . . . . . . . . . . . . . . . . . . . 6
Business expenses not for use of home . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Business furniture and equipment . . . . . . . . . . . . . . . . . . . . . 15 Business percentage . . . . . . . . . . . . . 6 Business use of the home requirements (See Qualifying for a deduction)
Carryover of expenses . . . . . . . . . . . 7 Casualty losses . . . . . . . . . . . . . . . . . . . 9 Child and Adult Food Care Program reimbursements . . . . . 12 Computer: Listed property . . . . . . . . . . . . . . . . . . 16
Daycare facilities (See also Family daycare providers) . . . . . . . . . . 11, 12 Eligible children for standard meal and snack rates . . . . . . . . . . . . . . 12 Exceptions for regular use requirement . . . . . . . . . . . . . . . . . . 11 Family daycare . . . . . . . . . . . . . . . . . 12 Family daycare provider . . . . . . . . 12 Meals . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Regular use . . . . . . . . . . . . . . . . . . . . 11 Standard meal and snack rates . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Deducting expenses . . . . . . . . . . . . . . 8 Deduction limit . . . . . . . . . . . . . . . . . . . . 7 Deduction requirements: Employee use . . . . . . . . . . . . . . . . . . . 2 Exceptions to exclusive use . . . . . 3 Exclusive use . . . . . . . . . . . . . . . . . . . . 3 More than one trade or business . . . . . . . . . . . . . . . . . . . . . . 5 Place to meet clients . . . . . . . . . . . . 6 Principal place of business . . . . . . 3 Regular use . . . . . . . . . . . . . . . . . . . . . 3 Separate structure . . . . . . . . . . . . . . . 6 Storage of inventory or product samples . . . . . . . . . . . . . . . . . . . . . . . 3 Page 32
Trade or business use . . . . . . . . . . . 3 Deductions: Figuring . . . . . . . . . . . . . . . . . . . . . . 6, 27 Limit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Qualifying for . . . . . . . . . . . . . . . . . . 2-6 Unreimbursed partnership expenses . . . . . . . . . . . . . . . . . . . . . 21 Dentists . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Depreciation . . . . . . . . . . . . . . . . . . . . . 16 5-year property . . . . . . . . . . . . . . . . . 17 7-year property . . . . . . . . . . . . . . . . . 17 Adjusted basis . . . . . . . . . . . . . . . . . . 10 Fair market value . . . . . . . . . . . . . . . 10 Figuring depreciation for the current year . . . . . . . . . . . . . . . . . . 10 Furniture and equipment . . . . 15, 17 Home . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Nonresidential real property . . . . 10 Percentage table for 39-year nonresidential real property . . . . . . . . . . . . . . . . . . 10, 11 Percentage table for 5- and 7-year property . . . . . . . . . . . . . . . . . . . . . . 17 Permanent improvements . . . . . 10, 11 Depreciation of home . . . . . . . . . . . 10 Basis adjustment . . . . . . . . . . . . . . . 15 MACRS (Table 2) . . . . . . . . . . . 10, 11 Property bought for business use . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Sale or exchange of home . . . . . . 15 Doctors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Examples of . . . . . . . . . . . . . . . . . . . . . 8 Indirect . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Insurance . . . . . . . . . . . . . . . . . . . . . . . . 9 Mortgage interest . . . . . . . . . . . . . . . . 8 Real estate taxes . . . . . . . . . . . . . . . . 8 Related to tax-exempt income . . . . . . . . . . . . . . . . . . . . . . . . 8 Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Repairs . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Security system . . . . . . . . . . . . . . . . . . 9 Telephone . . . . . . . . . . . . . . . . . . . . . . . 9 Types of . . . . . . . . . . . . . . . . . . . . . . . . . 8 Unrelated . . . . . . . . . . . . . . . . . . . . . . . . 8 Utilities and services . . . . . . . . . . . . . 9 Where to deduct . . . . . . . . . . . . . . . . 18
Fair market value . . . . . . . . . . . . . . . . 10 Family daycare providers: Meal and snack log (Exhibit A) . . . . . . . . . . . . . . . . . . . . . . . . 12, 31 Standard meal and snack rates . . . . . . . . . . . . . . . . . . . . . . . . . . 12 2011 rates (Table 3) . . . . . . . . . . 12 Figuring the deduction: Business percentage . . . . . . . . . . . . 6 Deduction limit . . . . . . . . . . . . . . . . . . . 7 Part-year use . . . . . . . . . . . . . . . . . . . . 7 Form . . . . . . . . . . . . . . . . . . . . . . . . 2, 18, 19 1040, Schedule C: Filled in, example . . . . . . . . . . 21-22 1040, Schedule F . . . . . . . . . . . . . . . 19 Worksheet . . . . . . . . . . . . . . . . . . . . 26 2106 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 4562 . . . . . . . . . . . . . . . . . . . . 16, 21, 22 4684 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 8829 . . . . . . . . . . . . . . . . . . . . . . . . 7, 8, 9 Completed sample . . . . . . . 12, 22 W-2: Reimbursed expenses . . . . . . . 19 Free tax services . . . . . . . . . . . . . . . . 28 Furniture and equipment . . . . . . . . 15
Employee use of home . . . . . . . . . . . 2 Employees: Adequately accounting to employer . . . . . . . . . . . . . . . . . . . . . 19 Casualty losses . . . . . . . . . . . . . . . . . 20 Mortgage interest . . . . . . . . . . . 19, 20 Other expenses . . . . . . . . . . . . . . . . . 20 Real estate taxes . . . . . . . . . . . . . . . 20 Rental to employer . . . . . . . . . . . . . . 6 Worksheet to figure deduction . . . . . . . . . . . . . . . . . . . . . 26 Example: Form 4562 . . . . . . . . . . . . . . . . . . 21, 22 Form 8829 . . . . . . . . . . . . . . . . . . 21, 22 Schedule C . . . . . . . . . . . . . . . . . 21, 22 Exclusive use . . . . . . . . . . . . . . . . . . . . . 3 Expenses: Casualty losses . . . . . . . . . . . . . . . . . . 9 Deducting . . . . . . . . . . . . . . . . . . . . . . . . 8 Direct . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Help (See Tax help) Home: Business percentage . . . . . . . . . . . . 6 Defined . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Depreciation . . . . . . . . . . . . . . . . . . . . 10 Sale of . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Home expenses, Can you deduct business use of, Figure A . . . . . . 4, 5 Publication 587 (2011)
Improvements (See Permanent improvements) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 9 Inventory, storage of . . . . . . . . . . . . . 3
Listed property: Computers . . . . . . . . . . . . . . . . . . . . . . 16 Defined . . . . . . . . . . . . . . . . . . . . . . . . . 16 Employee requirements . . . . . . . . 16 Reporting and recordkeeping requirements . . . . . . . . . . . . . . . . . 16 Years following the year placed in service . . . . . . . . . . . . . . . . . . . . . . . 16
Place of business, more than one . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Principal place of business . . . . . . 3 Product samples . . . . . . . . . . . . . . . . . . 3 Property bought for business use: Depreciation . . . . . . . . . . . . . . . . . . . . 17 Section 179 deduction . . . . . . . . . . 16 Property converted to business use, Personal . . . . . . . . . . . . . . . . . . 17 Publications (See Tax help)
Property bought for business use . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Security system . . . . . . . . . . . . . . . . . . 9 Self-employed persons: Deduction of expenses . . . . . . . . . 18 Separate structure . . . . . . . . . . . . . . . . 6 Standard meal and snack rates . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Storage of inventory . . . . . . . . . . . . . . 3
Qualifying for a deduction . . . . . . . 2
Tables and figures: MACRS: Depreciation of home (Table 2) . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Percentage table for 5- and 7-year property (Table 4) . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Qualifying for deduction (Figure A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Standard meal and snack rates (Table 3) . . . . . . . . . . . . . . . . . . . . . 14 Types of expenses (Table 1) . . . . 8 Tax help . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Taxpayer Advocate . . . . . . . . . . . . . . 29 Telephone . . . . . . . . . . . . . . . . . . . . . . . . . 9 Trade or business use . . . . . . . . . . . . 3 TTY/TDD information . . . . . . . . . . . . 28 Types of expenses . . . . . . . . . . . . . . . 8
Real estate taxes . . . . . . . . . . . . . . . . . 8 Recordkeeping . . . . . . . . . . . . . . . . . . . 18 Recordkeeping requirements: Business furniture and equipment . . . . . . . . . . . . . . . . . . . . 16 Family daycare provider meal and snack log (Exhibit A) . . . . . 12, 31 Regular use . . . . . . . . . . . . . . . . . . . . . . . 3 Reminders . . . . . . . . . . . . . . . . . . . . . . . . 1 Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Rental to employer . . . . . . . . . . . . . . . 6 Repairs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Reporting requirements: Business furniture and equipment . . . . . . . . . . . . . . . . . . . . 16
MACRS percentage table: 5- and 7-year property . . . . . . . . . . 17 39-year nonresidential real property . . . . . . . . . . . . . . . . . . 10, 11 Meals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Meeting with patients, clients, or customers on premises . . . . . . . . 6 More information (See Tax help) More than one place of business . . . . . . . . . . . . . . . . . . . . . . . . 7 More than one trade or business . . . . . . . . . . . . . . . . . . . . . . . . 5 More-than-50%-use test . . . . . . . . . 16 Mortgage insurance premiums . . . . . . . . . . . . . . . . . . . . . . . 8 Mortgage interest . . . . . . . . . . . . . . . . . 8
Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Sale or exchange of your home . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Basis adjustment . . . . . . . . . . . . . . . 15 Depreciation taken . . . . . . . . . . . . . . 15 Ownership and use tests . . . . . . . 14 Schedule C Example . . . . . . . . . . . . 21 Schedule F (See Worksheet to figure the deduction) Section 179 . . . . . . . . . . . . . . . . . . . . . . 16 Furniture and equipment . . . . 15, 16 Listed property . . . . . . . . . . . . . . 15, 16 Personal property converted to business use . . . . . . . . . . . . . . . . . 17
Partners (See Worksheet to figure the deduction) Partnership expenses, unreimbursed . . . . . . . . . . . . . . . . . 21 Part-year use . . . . . . . . . . . . . . . . . . . . . . 7 Permanent improvements . . . . . . 10, 11 Personal property converted to business use . . . . . . . . . . . . . . . . . . 17
Where to deduct expenses . . . . . . 18 Employees . . . . . . . . . . . . . . . . . . . . . 19 Self-employed . . . . . . . . . . . . . . . . . . 18 Worksheet to figure the deduction for business use of your home . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Worksheet, instructions . . . . . . . . . 27
Tax Publications for Individual Taxpayers
General Guides 1 17 334 509 910 3 54 225 463 501 502 503 504 505 514 516 517 519 521 523 524 525 526 527 529 530 Your Rights as a Taxpayer Your Federal Income Tax For Individuals Tax Guide for Small Business (For Individuals Who Use Schedule C or C-EZ) Tax Calendars for 2012 IRS Guide to Free Tax Services Armed Forces’ Tax Guide Tax Guide for U.S. Citizens and Resident Aliens Abroad Farmer’s Tax Guide Travel, Entertainment, Gift, and Car Expenses Exemptions, Standard Deduction, and Filing Information Medical and Dental Expenses (Including the Health Coverage Tax Credit) Child and Dependent Care Expenses Divorced or Separated Individuals Tax Withholding and Estimated Tax Foreign Tax Credit for Individuals U.S. Government Civilian Employees Stationed Abroad Social Security and Other Information for Members of the Clergy and Religious Workers U.S. Tax Guide for Aliens Moving Expenses Selling Your Home Credit for the Elderly or the Disabled Taxable and Nontaxable Income Charitable Contributions Residential Rental Property (Including Rental of Vacation Homes) Miscellaneous Deductions Tax Information for Homeowners 531 535 536 537 541 544 547 550 551 554 555 556 559 561 570 571
See How To Get Tax Help for a variety of ways to get publications, including by computer, phone, and mail.
908 915 925 926 929 936 946 947 950 969 970 971 972 1542 1544 1546 Bankruptcy Tax Guide Social Security and Equivalent Railroad Retirement Benefits Passive Activity and At-Risk Rules Household Employer’s Tax Guide For Wages Paid in 2012 Tax Rules for Children and Dependents Home Mortgage Interest Deduction How To Depreciate Property Practice Before the IRS and Power of Attorney Introduction to Estate and Gift Taxes Health Savings Accounts and Other Tax-Favored Health Plans Tax Benefits for Education Innocent Spouse Relief Child Tax Credit Per Diem Rates (For Travel Within the Continental United States) Reporting Cash Payments of Over $10,000 (Received in a Trade or Business) Taxpayer Advocate Service – Your Voice at the IRS
575 584 587 590 594 596 721 901 907
Reporting Tip Income Business Expenses Net Operating Losses (NOLs) for Individuals, Estates, and Trusts Installment Sales Partnerships Sales and Other Dispositions of Assets Casualties, Disasters, and Thefts Investment Income and Expenses (Including Capital Gains and Losses) Basis of Assets Tax Guide for Seniors Community Property Examination of Returns, Appeal Rights, and Claims for Refund Survivors, Executors, and Administrators Determining the Value of Donated Property Tax Guide for Individuals With Income From U.S. Possessions Tax-Sheltered Annuity Plans (403(b) Plans) For Employees of Public Schools and Certain Tax-Exempt Organizations Pension and Annuity Income Casualty, Disaster, and Theft Loss Workbook (Personal-Use Property) Business Use of Your Home (Including Use by Daycare Providers) Individual Retirement Arrangements (IRAs) The IRS Collection Process Earned Income Credit (EIC) Tax Guide to U.S. Civil Service Retirement Benefits U.S. Tax Treaties Tax Highlights for Persons with Disabilities
Spanish Language Publications Derechos del Contribuyente El Impuesto Federal sobre los Ingresos Para Personas Fisicas 547(SP) Hechos Fortuitos Desastres y Robos 584(SP) Registro de Perdidas ´ por Hechos Fortuitos (Imprevistos), Desastres y Robos (Propiedad de Uso Personal) 594SP El Proceso de Cobro del IRS 596SP Credito ´ por Ingreso del Trabajo 850(EN/ English-Spanish Glossary of Words and SP) Phrases Used in Publications Issued by the Internal Revenue Service 1544 Informe de Pagos en Efectivo en Exceso (SP) de $10,000 (Recibidos en una Ocupacion ´ o Negocio) 1SP 17(SP)
Form Number and Title 1040 Sch A Sch B Sch C Sch C-EZ Sch D Sch E Sch EIC Sch F Sch H Sch J Sch R Sch SE 1040A Sch B 1040EZ 1040-ES 1040X 2106 2106-EZ 2210
See How To Get Tax Help for a variety of ways to get forms, including by computer, phone, and mail.
2441 2848 2848(SP) 3903 4562 4868 4868(SP) 4952 5329 6251 8283 8582 8606 8812 8822 8829 8863 8949 9465 9465(SP) Child and Dependent Care Expenses Power of Attorney and Declaration of Representative Poder Legal y Declaracion ´ del Representante Moving Expenses Depreciation and Amortization Application for Automatic Extension of Time To File U.S. Individual Income Tax Return Solicitud de Prorroga ´ Automatica ´ para Presentar la Declaracion ´ del Impuesto sobre el Ingreso Personal de los Estados Unidos Investment Interest Expense Deduction Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts Alternative Minimum Tax — Individuals Noncash Charitable Contributions Passive Activity Loss Limitations Nondeductible IRAs Additional Child Tax Credit Change of Address Expenses for Business Use of Your Home Education Credits (American Opportunity, and Lifetime Learning Credits) Sales and Other Dispositions of Capital Assets Installment Agreement Request Solicitud para un Plan de Pagos a Plazos
U.S. Individual Income Tax Return Itemized Deductions Interest and Ordinary Dividends Profit or Loss From Business Net Profit From Business Capital Gains and Losses Supplemental Income and Loss Earned Income Credit Profit or Loss From Farming Household Employment Taxes Income Averaging for Farmers and Fishermen Credit for the Elderly or the Disabled Self-Employment Tax U.S. Individual Income Tax Return Interest and Ordinary Dividends Income Tax Return for Single and Joint Filers With No Dependents Estimated Tax for Individuals Amended U.S. Individual Income Tax Return Employee Business Expenses Unreimbursed Employee Business Expenses Underpayment of Estimated Tax by Individuals, Estates, and Trusts
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