Form 8829 is used by self-employed individuals and sole proprietors to calculate and claim the business-use-of-home deduction on Schedule C — based on the percentage of the home exclusively and regularly used for business (irs.gov/forms-pubs/about-form-8829).
Form 8829 (Expenses for Business Use of Your Home) is filed with Schedule C by sole proprietors and single-member LLC owners who use a dedicated portion of their home exclusively and regularly for business. It calculates the allowable deduction by multiplying eligible home expenses by the business-use percentage (square footage of business area ÷ total home square footage). Eligible expenses allocated by the business-use percentage include: mortgage interest or rent, real estate taxes, homeowners or renters insurance, utilities (heat, electricity, water), general home repairs and maintenance, and depreciation of the home's structure (the land value is excluded). Direct expenses that benefit only the office (painting the office, dedicated office flooring) are 100% deductible without allocation. Two methods under IRC §280A: The regular method uses Form 8829 to calculate actual expenses proportionally. The simplified method (Rev. Proc. 2013-13) allows a $5/square foot deduction on up to 300 sq ft ($1,500 maximum) without tracking actual expenses. The regular method typically yields a larger deduction for homeowners due to depreciation. An important rule: the deduction cannot exceed the business income from that activity (cannot create a net loss) — excess deductions carry forward to the next year. For lenders: the home office deduction on Schedule C is a non-cash or low-cash deduction that lenders often add back to qualifying income (especially the depreciation component). The IRS guidance is at irs.gov/businesses/small-businesses-self-employed/home-office-deduction.
The space must be used only for business — not dual-use (a dining room table used for both family meals and work does not qualify). It must be used regularly, not just occasionally. The space must be the principal place of business or a place used exclusively for meeting clients. A separate structure (detached garage, studio) used for business also qualifies (irs.gov/forms-pubs/about-form-8829).
Not via Form 8829. S-corp shareholders cannot claim a home office deduction directly on their personal return for a home used for the S-corp's business. Instead, the S-corp should adopt an accountable plan and reimburse the employee-shareholder for home office expenses — those reimbursements are a deductible business expense for the S-corp and tax-free to the shareholder (irs.gov/businesses/small-businesses-self-employed/home-office-deduction).
Depreciation claimed on a home office reduces the cost basis of the home. When you sell, the depreciation-claimed portion is subject to IRC §1250 unrecaptured depreciation tax (maximum 25%) even if the home sale otherwise qualifies for the primary residence exclusion ($250,000 / $500,000). This 'depreciation recapture' is a long-term consideration of the home office election.