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1040nr ez online Publication 587 - Main Content Table of Contents Qualifying for a DeductionExclusive Use Regular Use Trade or Business Use Principal Place of Business Place To Meet Patients, Clients, or Customers Separate Structure Figuring the DeductionUsing Actual Expenses Using the Simplified Method Daycare Facility Standard meal and snack rates. 1040nr ez online Sale or Exchange of Your HomeGain on Sale Depreciation Basis Adjustment Reporting the Sale More Information Business Furniture and EquipmentListed Property Property Bought for Business Use Personal Property Converted to Business Use Recordkeeping Where To DeductSelf-Employed Persons Employees Partners How To Get Tax HelpLow Income Taxpayer Clinics Worksheet To Figure the Deduction for Business Use of Your HomeInstructions for the Worksheet Worksheets To Figure the Deduction for Business Use of Your Home (Simplified Method) Instructions for the Simplified Method Worksheet Instructions for the Daycare Facility Worksheet Instructions for the Area Adjustment Worksheet Qualifying for a Deduction Generally, you cannot deduct items related to your home, such as mortgage interest, real estate taxes, utilities, maintenance, rent, depreciation, or property insurance, as business expenses. 1040nr ez online However, you may be able to deduct expenses related to the business use of part of your home if you meet specific requirements. 1040nr ez online Even then, the deductible amount of these types of expenses may be limited. 1040nr ez online Use this section and Figure A, later, to decide if you can deduct expenses for the business use of your home. 1040nr ez online To qualify to deduct expenses for business use of your home, you must use part of your home: Exclusively and regularly as your principal place of business (defined later), Exclusively and regularly as a place where you meet or deal with patients, clients, or customers in the normal course of your trade or business, In the case of a separate structure which is not attached to your home, in connection with your trade or business, On a regular basis for certain storage use (see Storage of inventory or product samples , later), For rental use (see Publication 527), or As a daycare facility (see Daycare Facility , later). 1040nr ez online Additional tests for employee use. 1040nr ez online   If you are an employee and you use a part of your home for business, you may qualify for a deduction for its business use. 1040nr ez online You must meet the tests discussed earlier plus: Your business use must be for the convenience of your employer, and You must not rent any part of your home to your employer and use the rented portion to perform services as an employee for that employer. 1040nr ez online If the use of the home office is merely appropriate and helpful, you cannot deduct expenses for the business use of your home. 1040nr ez online Exclusive Use To qualify under the exclusive use test, you must use a specific area of your home only for your trade or business. 1040nr ez online The area used for business can be a room or other separately identifiable space. 1040nr ez online The space does not need to be marked off by a permanent partition. 1040nr ez online 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. 1040nr ez online Example. 1040nr ez online You are an attorney and use a den in your home to write legal briefs and prepare clients' tax returns. 1040nr ez online Your family also uses the den for recreation. 1040nr ez online The den is not used exclusively in your trade or business, so you cannot claim a deduction for the business use of the den. 1040nr ez online Exceptions to Exclusive Use You do not have to meet the exclusive use test if either of the following applies. 1040nr ez online You use part of your home for the storage of inventory or product samples (discussed next). 1040nr ez online You use part of your home as a daycare facility, discussed later under Daycare Facility . 1040nr ez online Note. 1040nr ez online With the exception of these two uses, any portion of the home used for business purposes must meet the exclusive use test. 1040nr ez online Storage of inventory or product samples. 1040nr ez online    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. 1040nr ez online However, you must meet all the following tests. 1040nr ez online You sell products at wholesale or retail as your trade or business. 1040nr ez online You keep the inventory or product samples in your home for use in your trade or business. 1040nr ez online Your home is the only fixed location of your trade or business. 1040nr ez online You use the storage space on a regular basis. 1040nr ez online The space you use is a separately identifiable space suitable for storage. 1040nr ez online Example. 1040nr ez online Your home is the only fixed location of your business of selling mechanics' tools at retail. 1040nr ez online You regularly use half of your basement for storage of inventory and product samples. 1040nr ez online You sometimes use the area for personal purposes. 1040nr ez online The expenses for the storage space are deductible even though you do not use this part of your basement exclusively for business. 1040nr ez online Regular Use To qualify under the regular use test, you must use a specific area of your home for business on a regular basis. 1040nr ez online Incidental or occasional business use is not regular use. 1040nr ez online You must consider all facts and circumstances in determining whether your use is on a regular basis. 1040nr ez online 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. 1040nr ez online 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. 1040nr ez online Example. 1040nr ez online 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. 1040nr ez online You do not make investments as a broker or dealer. 1040nr ez online So, your activities are not part of a trade or business and you cannot take a deduction for the business use of your home. 1040nr ez online Principal Place of Business You can have more than one business location, including your home, for a single trade or business. 1040nr ez online 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. 1040nr ez online To determine whether your home is your principal place of business, you must consider: The relative importance of the activities performed at each place where you conduct business, and The amount of time spent at each place where you conduct business. 1040nr ez online Your home office will qualify as your principal place of business if you meet the following requirements. 1040nr ez online You use it exclusively and regularly for administrative or management activities of your trade or business. 1040nr ez online You have no other fixed location where you conduct substantial administrative or management activities of your trade or business. 1040nr ez online If, after considering your business locations, your home cannot be identified as your principal place of business, you cannot deduct home office expenses. 1040nr ez online However, see the later discussions under Place To Meet Patients, Clients, or Customers and Separate Structure for other ways to qualify to deduct home office expenses. 1040nr ez online Administrative or management activities. 1040nr ez online   There are many activities that are administrative or managerial in nature. 1040nr ez online The following are a few examples. 1040nr ez online Billing customers, clients, or patients. 1040nr ez online Keeping books and records. 1040nr ez online Ordering supplies. 1040nr ez online Setting up appointments. 1040nr ez online Forwarding orders or writing reports. 1040nr ez online Administrative or management activities performed at other locations. 1040nr ez online   The following activities performed by you or others will not disqualify your home office from being your principal place of business. 1040nr ez online You have others conduct your administrative or management activities at locations other than your home. 1040nr ez online (For example, another company does your billing from its place of business. 1040nr ez online ) 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. 1040nr ez online You occasionally conduct minimal administrative or management activities at a fixed location outside your home. 1040nr ez online You conduct substantial nonadministrative or nonmanagement business activities at a fixed location outside your home. 1040nr ez online (For example, you meet with or provide services to customers, clients, or patients at a fixed location of the business outside your home. 1040nr ez online ) You have suitable space to conduct administrative or management activities outside your home, but choose to use your home office for those activities instead. 1040nr ez online Please click here for the text description of the image. 1040nr ez online Can you deduct business use of the home expenses? Example 1. 1040nr ez online John is a self-employed plumber. 1040nr ez online Most of John's time is spent at customers' homes and offices installing and repairing plumbing. 1040nr ez online 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. 1040nr ez online John writes up estimates and records of work completed at his customers' premises. 1040nr ez online He does not conduct any substantial administrative or management activities at any fixed location other than his home office. 1040nr ez online John does not do his own billing. 1040nr ez online He uses a local bookkeeping service to bill his customers. 1040nr ez online John's home office qualifies as his principal place of business for deducting expenses for its use. 1040nr ez online 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. 1040nr ez online His choice to have his billing done by another company does not disqualify his home office from being his principal place of business. 1040nr ez online He meets all the qualifications, including principal place of business, so he can deduct expenses (subject to certain limitations, explained later) for the business use of his home. 1040nr ez online Example 2. 1040nr ez online Pamela is a self-employed sales representative for several different product lines. 1040nr ez online 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. 1040nr ez online She occasionally writes up orders and sets up appointments from her hotel room when she is away on business overnight. 1040nr ez online Pamela's business is selling products to customers at various locations throughout her territory. 1040nr ez online To make these sales, she regularly visits customers to explain the available products and take orders. 1040nr ez online Pamela's home office qualifies as her principal place of business for deducting expenses for its use. 1040nr ez online She conducts administrative or management activities there and she has no other fixed location where she conducts substantial administrative or management activities. 1040nr ez online 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. 1040nr ez online She meets all the qualifications, including principal place of business, so she can deduct expenses (subject to certain limitations, explained later) for the business use of her home. 1040nr ez online Example 3. 1040nr ez online Paul is a self-employed anesthesiologist. 1040nr ez online He spends the majority of his time administering anesthesia and postoperative care in three local hospitals. 1040nr ez online One of the hospitals provides him with a small shared office where he could conduct administrative or management activities. 1040nr ez online Paul very rarely uses the office the hospital provides. 1040nr ez online He uses a room in his home that he has converted to an office. 1040nr ez online He uses this room exclusively and regularly to conduct all the following activities. 1040nr ez online Contacting patients, surgeons, and hospitals regarding scheduling. 1040nr ez online Preparing for treatments and presentations. 1040nr ez online Maintaining billing records and patient logs. 1040nr ez online Satisfying continuing medical education requirements. 1040nr ez online Reading medical journals and books. 1040nr ez online Paul's home office qualifies as his principal place of business for deducting expenses for its use. 1040nr ez online 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. 1040nr ez online 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. 1040nr ez online 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. 1040nr ez online He meets all the qualifications, including principal place of business, so he can deduct expenses (subject to certain limitations, explained later) for the business use of his home. 1040nr ez online Example 4. 1040nr ez online Kathleen is employed as a teacher. 1040nr ez online She is required to teach and meet with students at the school and to grade papers and tests. 1040nr ez online 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. 1040nr ez online The school does not require her to work at home. 1040nr ez online Kathleen prefers to use the office she has set up in her home and does not use the one provided by the school. 1040nr ez online She uses this home office exclusively and regularly for the administrative duties of her teaching job. 1040nr ez online 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. 1040nr ez online Her employer provides her with an office and does not require her to work at home, so she does not meet the convenience-of-the-employer test and cannot claim a deduction for the business use of her home. 1040nr ez online More Than One Trade or Business The same home office can be the principal place of business for two or more separate business activities. 1040nr ez online 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. 1040nr ez online You must use the home office exclusively and regularly for one or more of the following purposes. 1040nr ez online As the principal place of business for one or more of your trades or businesses. 1040nr ez online 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. 1040nr ez online If your home office is a separate structure, in connection with one or more of your trades or businesses. 1040nr ez online You can use your home office for more than one business activity, but you cannot use it for any nonbusiness (i. 1040nr ez online e. 1040nr ez online , personal) activities. 1040nr ez online If you are an employee, any use of the home office in connection with your employment must be for the convenience of your employer. 1040nr ez online See Rental to employer , later, if you rent part of your home to your employer. 1040nr ez online Example. 1040nr ez online Tracy White is employed as a teacher. 1040nr ez online Her principal place of work is the school, which provides her office space to do her school work. 1040nr ez online She also has a mail order jewelry business. 1040nr ez online All her work in the jewelry business is done in her home office and the office is used exclusively for that business. 1040nr ez online If she meets all the other tests, she can deduct expenses for the business use of her home for the jewelry business. 1040nr ez online 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. 1040nr ez online As an employee, Tracy must also meet the convenience-of-the-employer test to qualify for the deduction. 1040nr ez online 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. 1040nr ez online 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. 1040nr ez online You physically meet with patients, clients, or customers on your premises. 1040nr ez online Their use of your home is substantial and integral to the conduct of your business. 1040nr ez online Doctors, dentists, attorneys, and other professionals who maintain offices in their homes generally will meet this requirement. 1040nr ez online Using your home for occasional meetings and telephone calls will not qualify you to deduct expenses for the business use of your home. 1040nr ez online 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. 1040nr ez online Example. 1040nr ez online June Quill, a self-employed attorney, works 3 days a week in her city office. 1040nr ez online She works 2 days a week in her home office used only for business. 1040nr ez online She regularly meets clients there. 1040nr ez online Her home office qualifies for a business deduction because she meets clients there in the normal course of her business. 1040nr ez online 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. 1040nr ez online The structure does not have to be your principal place of business or a place where you meet patients, clients, or customers. 1040nr ez online Example. 1040nr ez online John Berry operates a floral shop in town. 1040nr ez online He grows the plants for his shop in a greenhouse behind his home. 1040nr ez online He uses the greenhouse exclusively and regularly in his business, so he can deduct the expenses for its use, subject to certain limitations, explained later. 1040nr ez online 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. 1040nr ez online When figuring the amount you can deduct for the business use of your home, you will use either your actual expenses or a simplified method. 1040nr ez online Electing to use the simplified method. 1040nr ez online   The simplified method is an alternative to the calculation, allocation, and substantiation of actual expenses. 1040nr ez online You choose whether or not to figure your deduction using the simplified method each taxable year. 1040nr ez online See Using the Simplified Method , later. 1040nr ez online Rental to employer. 1040nr ez online   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. 1040nr ez online You can deduct mortgage interest, qualified mortgage insurance premiums, real estate taxes, and personal casualty losses for the rented part, subject to any limitations. 1040nr ez online However, you cannot deduct otherwise allowable trade or business expenses, business casualty losses, or depreciation related to the use of your home (or use the simplified method as an alternative to deducting these actual expenses) in performing services for your employer. 1040nr ez online Using Actual Expenses If you do not or cannot elect to use the simplified method for a home, you will figure your deduction for that home using your actual expenses. 1040nr ez online You will also need to figure the percentage of your home used for business and the limit on the deduction. 1040nr ez online If you are an employee or a partner, or you use your home in your farming business and you file Schedule F (Form 1040), you can use the Worksheet To Figure the Deduction for Business Use of Your Home, near the end of this publication, to help you figure your deduction. 1040nr ez online If you use your home in a trade or business and you file Schedule C (Form 1040), you will use Form 8829 to figure your deduction. 1040nr ez online Part-year use. 1040nr ez online   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. 1040nr ez online 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. 1040nr ez online Expenses related to tax-exempt income. 1040nr ez online   Generally, you cannot deduct expenses that are related to tax-exempt allowances. 1040nr ez online 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. 1040nr ez online No deduction is allowed for other expenses related to the tax-exempt allowance. 1040nr ez online   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. 1040nr ez online Actual Expenses You must divide the expenses of operating your home between personal and business use. 1040nr ez online The part of a home operating expense you can use to figure your deduction depends on both of the following. 1040nr ez online Whether the expense is direct, indirect, or unrelated. 1040nr ez online The percentage of your home used for business. 1040nr ez online Table 1, next, describes the types of expenses you may have and the extent to which they are deductible. 1040nr ez online Table 1. 1040nr ez online Types of Expenses  Expense  Description  Deductibility Direct Expenses only for  the business part  of your home. 1040nr ez online Deductible in full. 1040nr ez online *   Examples:  Painting or repairs  only in the area  used for business. 1040nr ez online Exception: May be only partially  deductible in a daycare facility. 1040nr ez online See Daycare Facility , later. 1040nr ez online Indirect Expenses for  keeping up and running your  entire home. 1040nr ez online Deductible based on the percentage of your home used for business. 1040nr ez online *   Examples:  Insurance, utilities, and  general repairs. 1040nr ez online   Unrelated Expenses only for  the parts of your  home not used  for business. 1040nr ez online Not deductible. 1040nr ez online   Examples:  Lawn care or painting  a room not used  for business. 1040nr ez online   *Subject to the deduction limit, discussed later. 1040nr ez online Form 8829 and the Worksheet To Figure the Deduction for Business Use of Your Home have separate columns for direct and indirect expenses. 1040nr ez online Certain expenses are deductible whether or not you use your home for business. 1040nr ez online 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. 1040nr ez online These expenses include the following. 1040nr ez online Real estate taxes. 1040nr ez online Qualified mortgage insurance premiums. 1040nr ez online Deductible mortgage interest. 1040nr ez online Casualty losses. 1040nr ez online Other expenses are deductible only if you use your home for business. 1040nr ez online You can use the business percentage of these expenses to figure your total business use of the home deduction. 1040nr ez online These expenses generally include (but are not limited to) the following. 1040nr ez online Depreciation (covered under Depreciating Your Home , later). 1040nr ez online Insurance. 1040nr ez online Rent paid for the use of property you do not own but use in your trade or business. 1040nr ez online Repairs. 1040nr ez online Security system. 1040nr ez online Utilities and services. 1040nr ez online Real estate taxes. 1040nr ez online   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. 1040nr ez online   For more information on the deduction for real estate taxes, see Publication 530, Tax Information for Homeowners. 1040nr ez online Deductible mortgage interest. 1040nr ez online   To figure the business part of your deductible mortgage interest, multiply this interest by the percentage of your home used for business. 1040nr ez online You can include interest on a second mortgage in this computation. 1040nr ez online 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. 1040nr ez online For more information on what interest is deductible, see Publication 936, Home Mortgage Interest Deduction. 1040nr ez online Qualified mortgage insurance premiums. 1040nr ez online   To figure the business part of your qualified mortgage insurance premiums, multiply the premiums by the percentage of your home used for business. 1040nr ez online You can include premiums for insurance on a second mortgage in this computation. 1040nr ez online 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. 1040nr ez online For more information, see Publication 936, and Line 13 in the Instructions for Schedule A (Form 1040). 1040nr ez online Casualty losses. 1040nr ez online    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. 1040nr ez online A direct expense is the loss on the portion of the property you use only in your business. 1040nr ez online Use the entire loss to figure the business use of the home deduction. 1040nr ez online An indirect expense is the loss on property you use for both business and personal purposes. 1040nr ez online Use only the business portion to figure the deduction. 1040nr ez online An unrelated expense is the loss on property you do not use in your business. 1040nr ez online Do not use any of the loss to figure the deduction. 1040nr ez online Example. 1040nr ez online You meet the rules to take a deduction for an office in your home that is 10% of the total area of your house. 1040nr ez online A storm damages your roof. 1040nr ez online 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. 1040nr ez online You would complete Form 4684, Casualties and Thefts, to report your loss. 1040nr ez online 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. 1040nr ez online 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. 1040nr ez online Since you use 10% of your home for business purposes, use 10% of the cost or adjusted basis of your home, insurance or other reimbursement, and fair market value, both before and after the storm, to figure the amounts to enter on lines 20, 21, 23, and 24 of Form 4684. 1040nr ez online Forms and worksheets to use. 1040nr ez online   If you are filing Schedule C (Form 1040), get Form 8829 and follow the instructions for casualty losses. 1040nr ez online 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. 1040nr ez online You will also need to get Form 4684. 1040nr ez online More information. 1040nr ez online   For more information on casualty losses, see Publication 547, Casualties, Disasters, and Thefts. 1040nr ez online Insurance. 1040nr ez online   You can deduct the cost of insurance that covers the business part of your home. 1040nr ez online 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. 1040nr ez online You can deduct the business percentage of the part that applies to the following year in that year. 1040nr ez online Rent. 1040nr ez online   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. 1040nr ez online To figure your deduction, multiply your rent payments by the percentage of your home used for business. 1040nr ez online   If you own your home, you cannot deduct the fair rental value of your home. 1040nr ez online However, see Depreciating Your Home , later. 1040nr ez online Repairs. 1040nr ez online   The cost of repairs that relate to your business, including labor (other than your own labor), is a deductible expense. 1040nr ez online For example, a furnace repair benefits the entire home. 1040nr ez online If you use 10% of your home for business, you can deduct 10% of the cost of the furnace repair. 1040nr ez online   Repairs keep your home in good working order over its useful life. 1040nr ez online Examples of common repairs are patching walls and floors, painting, wallpapering, repairing roofs and gutters, and mending leaks. 1040nr ez online However, repairs are sometimes treated as a permanent improvement and are not deductible. 1040nr ez online See Permanent improvements , later, under Depreciating Your Home. 1040nr ez online Security system. 1040nr ez online   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. 1040nr ez online 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. 1040nr ez online Utilities and services. 1040nr ez online   Expenses for utilities and services, such as electricity, gas, trash removal, and cleaning services, are primarily personal expenses. 1040nr ez online However, if you use part of your home for business, you can deduct the business part of these expenses. 1040nr ez online Generally, the business percentage for utilities is the same as the percentage of your home used for business. 1040nr ez online Telephone. 1040nr ez online   The basic local telephone service charge, including taxes, for the first telephone line into your home (i. 1040nr ez online e. 1040nr ez online , landline) is a nondeductible personal expense. 1040nr ez online 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. 1040nr ez online Do not include these expenses as a cost of using your home for business. 1040nr ez online Deduct these charges separately on the appropriate form or schedule. 1040nr ez online 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). 1040nr ez online Depreciating Your Home If you own your home and qualify to deduct expenses for its business use, you can claim a deduction for depreciation. 1040nr ez online Depreciation is an allowance for the wear and tear on the part of your home used for business. 1040nr ez online You cannot depreciate the cost or value of the land. 1040nr ez online You recover its cost when you sell or otherwise dispose of the property. 1040nr ez online Before you figure your depreciation deduction, you need to know the following information. 1040nr ez online The month and year you started using your home for business. 1040nr ez online The adjusted basis and fair market value of your home (excluding land) at the time you began using it for business. 1040nr ez online The cost of any improvements before and after you began using the property for business. 1040nr ez online The percentage of your home used for business. 1040nr ez online See Business Percentage , later. 1040nr ez online Adjusted basis defined. 1040nr ez online   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. 1040nr ez online For a discussion of adjusted basis, see Publication 551. 1040nr ez online Permanent improvements. 1040nr ez online   A permanent improvement increases the value of property, adds to its life, or gives it a new or different use. 1040nr ez online Examples of improvements are replacing electric wiring or plumbing, adding a new roof or addition, paneling, or remodeling. 1040nr ez online    You must carefully distinguish between repairs and improvements. 1040nr ez online See Repairs , earlier, under Actual Expenses. 1040nr ez online You also must keep accurate records of these expenses. 1040nr ez online These records will help you decide whether an expense is a deductible or a capital (added to the basis) expense. 1040nr ez online However, if you make repairs as part of an extensive remodeling or restoration of your home, the entire job is an improvement. 1040nr ez online Example. 1040nr ez online You buy an older home and fix up two rooms as a beauty salon. 1040nr ez online 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. 1040nr ez online Normally, the patching, painting, and floor work are repairs and the other expenses are permanent improvements. 1040nr ez online 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. 1040nr ez online You cannot deduct any portion of it as a repair expense. 1040nr ez online Adjusting for depreciation deducted in earlier years. 1040nr ez online   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. 1040nr ez online 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. 1040nr ez online If you did not deduct any depreciation, decrease the basis by the amount you could have deducted. 1040nr ez online   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. 1040nr ez online   If you deducted the incorrect amount of depreciation, see Publication 946. 1040nr ez online Fair market value defined. 1040nr ez online   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. 1040nr ez online 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. 1040nr ez online Figuring the depreciation deduction for the current year. 1040nr ez online   If you began using your home for business before 2013, continue to use the same depreciation method you used in past tax years. 1040nr ez online   If you began using your home for business for the first time in 2013, depreciate the business part as nonresidential real property under the modified accelerated cost recovery system (MACRS). 1040nr ez online Under MACRS, nonresidential real property is depreciated using the straight line method over 39 years. 1040nr ez online For more information on MACRS and other methods of depreciation, see Publication 946. 1040nr ez online   To figure the depreciation deduction, you must first figure the part of the cost of your home that can be depreciated (depreciable basis). 1040nr ez online The depreciable basis is figured by multiplying the percentage of your home used for business by the smaller of the following. 1040nr ez online The adjusted basis of your home (excluding land) on the date you began using your home for business. 1040nr ez online The fair market value of your home (excluding land) on the date you began using your home for business. 1040nr ez online Depreciation table. 1040nr ez online   If 2013 was the first year you used your home for business, you can figure your 2013 depreciation for the business part of your home by using the appropriate percentage from the following table. 1040nr ez online Table 2. 1040nr ez online MACRS Percentage Table for 39-Year Nonresidential Real Property Month First Used for Business Percentage To Use 1 2. 1040nr ez online 461% 2 2. 1040nr ez online 247% 3 2. 1040nr ez online 033% 4 1. 1040nr ez online 819% 5 1. 1040nr ez online 605% 6 1. 1040nr ez online 391% 7 1. 1040nr ez online 177% 8 0. 1040nr ez online 963% 9 0. 1040nr ez online 749% 10 0. 1040nr ez online 535% 11 0. 1040nr ez online 321% 12 0. 1040nr ez online 107%   Multiply the depreciable basis of the business part of your home by the percentage from the table for the first month you use your home for business. 1040nr ez online See Publication 946 for the percentages for the remaining tax years of the recovery period. 1040nr ez online Example. 1040nr ez online In May, George Miller began to use one room in his home exclusively and regularly to meet clients. 1040nr ez online This room is 8% of the square footage of his home. 1040nr ez online He bought the home in 2003 for $125,000. 1040nr ez online He determined from his property tax records that his adjusted basis in the house (exclusive of land) is $115,000. 1040nr ez online In May, the house had a fair market value of $165,000. 1040nr ez online He multiplies his adjusted basis of $115,000 (which is less than the fair market value) by 8%. 1040nr ez online The result is $9,200, his depreciable basis for the business part of the house. 1040nr ez online George files his return based on the calendar year. 1040nr ez online May is the 5th month of his tax year. 1040nr ez online He multiplies his depreciable basis of $9,200 by 1. 1040nr ez online 605% (. 1040nr ez online 01605), the percentage from the table for the 5th month. 1040nr ez online His depreciation deduction is $147. 1040nr ez online 66. 1040nr ez online Depreciating permanent improvements. 1040nr ez online   Add the costs of permanent improvements made before you began using your home for business to the basis of your property. 1040nr ez online Depreciate these costs as part of the cost of your home as explained earlier. 1040nr ez online 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. 1040nr ez online 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. 1040nr ez online For improvements made this year, the recovery period is 39 years. 1040nr ez online For the percentage to use for the first year, see Table 2, earlier. 1040nr ez online For more information on recovery periods, see Publication 946. 1040nr ez online 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. 1040nr ez online Use the resulting percentage to figure the business part of the expenses for operating your entire home. 1040nr ez online You can use any reasonable method to determine the business percentage. 1040nr ez online The following are two commonly used methods for figuring the percentage. 1040nr ez online Divide the area (length multiplied by the width) used for business by the total area of your home. 1040nr ez online 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. 1040nr ez online Example 1. 1040nr ez online Your office is 240 square feet (12 feet × 20 feet). 1040nr ez online Your home is 1,200 square feet. 1040nr ez online Your office is 20% (240 ÷ 1,200) of the total area of your home. 1040nr ez online Your business percentage is 20%. 1040nr ez online Example 2. 1040nr ez online You use one room in your home for business. 1040nr ez online Your home has 10 rooms, all about equal size. 1040nr ez online Your office is 10% (1 ÷ 10) of the total area of your home. 1040nr ez online Your business percentage is 10%. 1040nr ez online 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. 1040nr ez online Deduction Limit If your gross income from the business use of your home equals or exceeds your total business expenses (including depreciation), you can deduct all your business expenses related to the use of your home. 1040nr ez online 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. 1040nr ez online Your deduction of otherwise nondeductible expenses, such as insurance, utilities, and depreciation of your home (with depreciation of your home taken last), that are allocable to the business, is limited to the gross income from the business use of your home minus the sum of the following. 1040nr ez online 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)). 1040nr ez online These expenses are discussed in detail under Actual Expenses , earlier. 1040nr ez online 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. 1040nr ez online If you are self-employed, do not include in (2) above your deduction for one-half of your self-employment tax. 1040nr ez online Carryover of unallowed expenses. 1040nr ez online   If your deductions are greater than the current year's limit, you can carry over the excess to the next year in which you use actual expenses. 1040nr ez online They are subject to the deduction limit for that year, whether or not you live in the same home during that year. 1040nr ez online Figuring the deduction limit and carryover. 1040nr ez online   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. 1040nr ez online If you file Schedule C (Form 1040), figure your deduction limit and carryover on Form 8829. 1040nr ez online Example. 1040nr ez online You meet the requirements for deducting expenses for the business use of your home. 1040nr ez online You use 20% of your home for business. 1040nr ez online In 2013, your business expenses and the expenses for the business use of your home are deducted from your gross income in the following order. 1040nr ez online    Gross income from business $6,000 Minus:   Deductible mortgage interest and real estate taxes (20%) 3,000 Business expenses not related to the use of your home (100%) (business phone, supplies, and depreciation on equipment) 2,000 Deduction limit $1,000 Minus other expenses allocable to business use of home:   Maintenance, insurance, and utilities (20%) 800 Depreciation allowed (20% = $1,600 allowable, but subject to balance of deduction limit) 200 Other expenses up to the deduction limit $1,000 Depreciation carryover to 2014 ($1,600 − $200) (subject to deduction limit in 2014) $1,400   You can deduct all of the business part of your deductible mortgage interest and real estate taxes ($3,000). 1040nr ez online You also can deduct all of your business expenses not related to the use of your home ($2,000). 1040nr ez online 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. 1040nr ez online Your deduction for depreciation for the business use of your home is limited to $200 ($1,000 minus $800) because of the deduction limit. 1040nr ez online You can carry over the $1,400 balance and add it to your depreciation for 2014, subject to your deduction limit in 2014. 1040nr ez online More than one place of business. 1040nr ez online   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. 1040nr ez online 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. 1040nr ez online 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. 1040nr ez online For more information on transportation costs, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. 1040nr ez online Using the Simplified Method The simplified method is an alternative to the calculation, allocation, and substantiation of actual expenses. 1040nr ez online In most cases, you will figure your deduction by multiplying $5, the prescribed rate, by the area of your home used for a qualified business use. 1040nr ez online The area you use to figure your deduction is limited to 300 square feet. 1040nr ez online See Simplified Amount , later, for information about figuring the amount of the deduction. 1040nr ez online For more information about the simplified method, see Revenue Procedure 2013-13, 2013-06 I. 1040nr ez online R. 1040nr ez online B. 1040nr ez online 478, available at www. 1040nr ez online irs. 1040nr ez online gov/irb/2013-06_IRB/ar09. 1040nr ez online html. 1040nr ez online Actual expenses and depreciation of your home. 1040nr ez online   If you elect to use the simplified method, you cannot deduct any actual expenses for the business except for business expenses that are not related to the use of the home. 1040nr ez online You also cannot deduct any depreciation (including any additional first-year depreciation) or section 179 expense for the portion of the home that is used for a qualified business use. 1040nr ez online The depreciation deduction allowable for that portion of the home is deemed to be zero for a year you use the simplified method. 1040nr ez online If you figure your deduction for business use of the home using actual expenses in a subsequent year, you will have to use the appropriate optional depreciation table for MACRS to figure your depreciation. 1040nr ez online More information. 1040nr ez online   For more information about claiming depreciation in a subsequent year, see Revenue Procedure 2013-13, 2013-06 I. 1040nr ez online R. 1040nr ez online B. 1040nr ez online 478, available at www. 1040nr ez online irs. 1040nr ez online gov/irb/2013-06_IRB/ar09. 1040nr ez online html. 1040nr ez online See Publication 946 for the optional depreciation tables Although you cannot deduct any depreciation or section 179 expense for the portion of your home used for a qualified business use, you may still claim depreciation or the section 179 expense deduction on other assets used in the business (for example, furniture and equipment). 1040nr ez online Expenses deductible without regard to business use. 1040nr ez online   When using the simplified method, treat as personal expenses those business expenses related to the use of the home that are deductible without regard to whether there is a qualified business use of the home. 1040nr ez online These expenses include mortgage interest, real estate taxes, and casualty losses, subject to any limitations. 1040nr ez online See Where To Deduct , later. 1040nr ez online If you also rent part of your home, you must still allocate these expenses between rental use and personal use (for this purpose, personal use includes business use reported using the simplified method). 1040nr ez online No deduction of carryover of actual expenses. 1040nr ez online   If you used actual expenses to figure your deduction for business use of the home in a prior year and your deduction was limited, you cannot deduct the disallowed amount carried over from the prior year during a year you figure your deduction using the simplified method. 1040nr ez online Instead, you will continue to carry over the disallowed amount to the next year that you use actual expenses to figure your deduction. 1040nr ez online Electing the Simplified Method You choose whether or not to figure your deduction using the simplified method each taxable year. 1040nr ez online Make the election for a home by using the simplified method to figure the deduction for the qualified business use of that home on a timely filed, original federal income tax return. 1040nr ez online An election for a taxable year, once made, is irrevocable. 1040nr ez online A change from using the simplified method in one year to actual expenses in a succeeding taxable year, or vice-versa, is not a change in method of accounting and does not require the consent of the Commissioner. 1040nr ez online Shared use. 1040nr ez online   If you share your home with someone else who also uses the home in a business that qualifies for this deduction, each of you make your own election. 1040nr ez online More than one qualified business use. 1040nr ez online   If you conduct more than one business that qualifies for this deduction in your home, your election to use the simplified method applies to all your qualified business uses of that home. 1040nr ez online More than one home. 1040nr ez online   If you used more than one home during the year (for example, you moved during the year), you can elect to use the simplified method for only one of the homes. 1040nr ez online You must figure the deduction for any other home using actual expenses. 1040nr ez online Simplified Amount Your deduction for the qualified business use of a home is the sum of each amount you figure for a separate qualified business use of your home. 1040nr ez online To figure your deduction for the business use of a home using the simplified method, you will need to know the following information for each qualified business use of the home. 1040nr ez online The allowable area of your home used in conducting the business. 1040nr ez online If you did not conduct the business for the entire year in the home or the area changed during the year, you will need to know the allowable area you used and the number of days you conducted the business for each month. 1040nr ez online The gross income from the business use of your home. 1040nr ez online The amount of the business expenses that are not related to the use of your home. 1040nr ez online If the qualified business use is for a daycare facility that uses space in your home on a regular (but not exclusive) basis, you will also need to know the percentage of time that part of your home is used for daycare. 1040nr ez online To figure the amount you can deduct for qualified business use of your home using the simplified method, follow these 3 steps. 1040nr ez online Multiply the allowable area by $5 (or less than $5 if the qualified business use is for a daycare that uses space in your home on a regular, but not exclusive, basis). 1040nr ez online See Allowable area and Space used regularly for daycare , later. 1040nr ez online Subtract the expenses from the business that are not related to the use of the home from the gross income related to the business use of the home. 1040nr ez online If these expenses are greater than the gross income from the business use of the home, then you cannot take a deduction for this business use of the home. 1040nr ez online See Gross income limitation , later. 1040nr ez online Take the smaller of the amounts from (1) and (2). 1040nr ez online This is the amount you can deduct for this qualified business use of your home using the simplified method. 1040nr ez online If you are an employee or a partner, or you use your home in your farming business and file Schedule F (Form 1040), you can use the Simplified Method Worksheet, near the end of this publication, to help you figure your deduction. 1040nr ez online If you use your home in a trade or business and you file Schedule C (Form 1040), you will use the Simplified Method Worksheet in your Instructions for Schedule C to figure your deduction. 1040nr ez online Allowable area. 1040nr ez online   In most cases, the allowable area is the smaller of the actual area (in square feet) of your home used in conducting the business and 300 square feet. 1040nr ez online Your allowable area may be smaller if you conducted the business as a qualified joint venture with your spouse, the area used by the business was shared with another qualified business use, you used the home for the business for only part of the year, or the area used by the business changed during the year. 1040nr ez online You can use the Area Adjustment Worksheet (for simplified method), near the end of this publication, to help you figure your allowable area for a qualified business use. 1040nr ez online Area used by a qualified joint venture. 1040nr ez online   If the qualified business use of the home is also a qualified joint venture, you and your spouse will figure the deduction for the business use separately. 1040nr ez online Split the actual area used in conducting business between you and your spouse in the same manner you split your other tax attributes. 1040nr ez online Then, each spouse will figure the allowable area separately. 1040nr ez online For more information about qualified joint ventures, see Qualified Joint Venture in the Instructions for Schedule C. 1040nr ez online Shared use. 1040nr ez online   If you share your home with someone else who uses the home to conduct business that also qualifies for this deduction, you may not include the same square feet to figure your deduction as the other person. 1040nr ez online You must allocate the shared space between you and the other person in a reasonable manner. 1040nr ez online Example. 1040nr ez online Kristin and Lindsey are roommates. 1040nr ez online Kristin uses 300 square feet of their home for a qualified business use. 1040nr ez online Lindsey uses 200 square feet of their home for a separate qualified business use. 1040nr ez online The qualified business uses share 100 square feet. 1040nr ez online In addition to the portion that they do not share, Kristin and Lindsey can both claim 50 of the 100 square feet or divide the 100 square feet between them in any reasonable manner. 1040nr ez online If divided evenly, Kristin could claim 250 square feet using the simplified method and Lindsey could claim 150 square feet. 1040nr ez online More than one qualified business use. 1040nr ez online   If you conduct more than one business qualifying for the deduction, you are limited to a maximum of 300 square feet for all of the businesses. 1040nr ez online Allocate the actual square footage used (up to the maximum of 300 square feet) among your qualified business uses in a reasonable manner. 1040nr ez online However, do not allocate more square feet to a qualified business use than you actually use for that business. 1040nr ez online Rental use. 1040nr ez online   The simplified method does not apply to rental use. 1040nr ez online A rental use that qualifies for the deduction must be figured using actual expenses. 1040nr ez online If the rental use and a qualified business use share the same area, you will have to allocate the actual area used between the two uses. 1040nr ez online You cannot use the same area to figure a deduction for the qualified business use as you are using to figure the deduction for the rental use. 1040nr ez online Part-year use or area changes. 1040nr ez online   If your qualified business use was for a portion of the taxable year (for example, a seasonal business or a business that begins during the taxable year) or you changed the square footage of your qualified business use, your deduction is limited to the average monthly allowable square footage. 1040nr ez online You calculate the average monthly allowable square footage by adding the amount of allowable square feet you used in each month and dividing the sum by 12. 1040nr ez online When determining the average monthly allowable square footage, you cannot take more than 300 square feet into account for any one month. 1040nr ez online Additionally, if your qualified business use was less than 15 days in a month, you must use -0- for that month. 1040nr ez online Example 1. 1040nr ez online Andy files his federal income tax return on a calendar year basis. 1040nr ez online On July 20, he began using 420 square feet of his home for a qualified business use. 1040nr ez online He continued to use the 420 square feet until the end of the year. 1040nr ez online His average monthly allowable square footage is 125 square feet, which is figured using 300 square feet for each month August through December divided by the number of months in the taxable year ((0 + 0 + 0 + 0 + 0 + 0 + 0 + 300 + 300 + 300 + 300 + 300)/12). 1040nr ez online Example 2. 1040nr ez online Amy files her federal income tax return on a calendar year basis. 1040nr ez online On April 20, she began using 100 square feet of her home for a qualified business use. 1040nr ez online On August 5, she expanded the area of her qualified use to 330 square feet. 1040nr ez online Amy continued to use the 330 square feet until the end of the year. 1040nr ez online Her average monthly allowable square footage is 150 square feet, which is figured using 100 square feet for May through July and 300 square feet for August through December divided by the number of months in the taxable year ((0 + 0 + 0 + 0 + 100 + 100 +100 + 300 + 300 + 300 + 300 + 300)/12). 1040nr ez online Gross income limitation. 1040nr ez online   Your deduction for business use of the home is limited to an amount equal to the gross income derived from the qualified business use of the home reduced by the business deductions that are unrelated to the use of your home. 1040nr ez online If the business deductions that are unrelated to the use of your home are greater than the gross income derived from the qualified business use of your home, then you cannot take a deduction for this qualified business use of your home. 1040nr ez online Business expenses not related to use of the home. 1040nr ez online   These expenses relate to the business activity in the home, but not to the use of the home itself. 1040nr ez online You can still deduct business expenses that are unrelated to the use of the home. 1040nr ez online See Where To Deduct , later. 1040nr ez online Examples of business expenses that are unrelated to the use of the home are advertising, wages, supplies, dues, and depreciation for equipment. 1040nr ez online Space used regularly for daycare. 1040nr ez online   If you do not use the area of your home exclusively for daycare, you must reduce the prescribed rate (maximum $5 per square foot) before figuring your deduction. 1040nr ez online The reduced rate will equal the prescribed rate times a fraction. 1040nr ez online The numerator of the fraction is the number of hours that the space was used during the year for daycare and the denominator is the total number of hours during the year that the space was available for all uses. 1040nr ez online You can use the Daycare Facility Worksheet (for simplified method), near the end of this publication, to help you figure the reduced rate. 1040nr ez online    If you used at least 300 square feet for daycare regularly and exclusively during the year, then you do not need to reduce the prescribed rate or complete the Daycare Facility Worksheet. 1040nr ez online Daycare Facility If you use space in your home on a regular basis for providing daycare, you may be able to claim a deduction for that part of your home even if you use the same space for nonbusiness purposes. 1040nr ez online To qualify for this exception to the exclusive use rule, you must meet both of the following requirements. 1040nr ez online 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. 1040nr ez online 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. 1040nr ez online You do not meet this requirement if your application was rejected or your license or other authorization was revoked. 1040nr ez online Figuring the deduction. 1040nr ez online   If you elect to use the simplified method for your home, figure your deduction as described earlier in Using the Simplified Method under Figuring the Deduction. 1040nr ez online    If you are figuring your deduction using actual expenses and you regularly use part of your home for daycare, figure what part is used for daycare, as explained in Business Percentage , earlier, under Figuring the Deduction. 1040nr ez online If you also use that part exclusively for daycare, deduct all the allocable expenses, subject to the deduction limit, as explained earlier. 1040nr ez online   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. 1040nr ez online 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. 1040nr ez online You do not have to keep records to show the specific hours the area was used for business. 1040nr ez online You can use the area occasionally for personal reasons. 1040nr ez online However, a room you use only occasionally for business does not qualify for the deduction. 1040nr ez online 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. 1040nr ez online You can compare the hours of business use in a week with the number of hours in a week (168). 1040nr ez online Or you can compare the hours of business use for the year with the number of hours in the year (8,760 in 2013). 1040nr ez online If you started or stopped using your home for daycare in 2013, you must prorate the number of hours based on the number of days the home was available for daycare. 1040nr ez online Example 1. 1040nr ez online Mary Lake used her basement to operate a daycare business for children. 1040nr ez online She figures the business percentage of the basement as follows. 1040nr ez online 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. 1040nr ez online During the other 12 hours a day, the family could use the basement. 1040nr ez online She figures the percentage of time the basement was used for daycare as follows. 1040nr ez online 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. 1040nr ez online 25%           Mary can deduct 34. 1040nr ez online 25% of any direct expenses for the basement. 1040nr ez online However, because her indirect expenses are for the entire house, she can deduct only 17. 1040nr ez online 13% of the indirect expenses. 1040nr ez online She figures the percentage for her indirect expenses as follows. 1040nr ez online Business percentage of the basement 50% Multiplied by: Percentage of time used for daycare × 34. 1040nr ez online 25% Percentage for indirect expenses 17. 1040nr ez online 13% Mary completes Form 8829, Part I, figuring the percentage of her home used for business, including the percentage of time the basement was used. 1040nr ez online In Part II, Mary figures her deductible expenses. 1040nr ez online She uses the following information to complete Part II. 1040nr ez online Gross income from her daycare business $50,000 Expenses not related to the business use of the home $25,000 Tentative profit $25,000 Rent $8,400 Utilities $850 Painting the basement $500 Mary enters her tentative profit, $25,000, on line 8. 1040nr ez online (This figure is the same as the amount on line 29 of her Schedule C (Form 1040). 1040nr ez online ) The expenses she paid for rent and utilities relate to her entire home. 1040nr ez online Therefore, she enters the amount paid for rent on line 18, column (b), and the amount paid for utilities on line 20, column (b). 1040nr ez online She shows the total of these expenses on line 22, column (b). 1040nr ez online For line 23, she multiplies the amount on line 22, column (b) by the percentage on line 7 and enters the result, $1,585. 1040nr ez online Mary paid $500 to have the basement painted. 1040nr ez online The painting is a direct expense. 1040nr ez online 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. 1040nr ez online 25% – line 6). 1040nr ez online She enters $171 (34. 1040nr ez online 25% × $500) on line 19, column (a). 1040nr ez online She adds line 22, column (a), and line 23 and enters $1,756 ($171 + $1,585) on line 25. 1040nr ez online This is less than her deduction limit (line 15), so she can deduct the entire amount. 1040nr ez online She follows the instructions to complete the rest of Part II and enters $1,756 on lines 33 and 35. 1040nr ez online She then carries the $1,756 to line 30 of her Schedule C (Form 1040). 1040nr ez online Example 2. 1040nr ez online 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. 1040nr ez online 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. 1040nr ez online 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. 1040nr ez online The basement and room are 60% of the total area of her home. 1040nr ez online In figuring her expenses, 34. 1040nr ez online 25% of any direct expenses for the basement and room are deductible. 1040nr ez online In addition, 20. 1040nr ez online 55% (34. 1040nr ez online 25% × 60%) of her indirect expenses are deductible. 1040nr ez online Example 3. 1040nr ez online Assume the same facts as in Example 1 except that Mary stopped using her home for a daycare facility on June 24, 2013. 1040nr ez online 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. 1040nr ez online During the other 12 hours a day, the family could still use the basement. 1040nr ez online She figures the percentage of time the basement was used for business as follows. 1040nr ez online 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. 1040nr ez online 71%           Mary can deduct 35. 1040nr ez online 71% of any direct expenses for the basement. 1040nr ez online However, because her indirect expenses are for the entire house, she can deduct only 17. 1040nr ez online 86% of the indirect expenses. 1040nr ez online She figures the percentage for her indirect expenses as follows. 1040nr ez online Business percentage of the basement 50% Multiplied by: Percentage of time used for daycare × 35. 1040nr ez online 71% Percentage for indirect expenses 17. 1040nr ez online 86% Meals. 1040nr ez online   If you provide food for your daycare recipients, do not include the expense as a cost of using your home for business. 1040nr ez online Claim it as a separate deduction on your Schedule C (Form 1040). 1040nr ez online You can never deduct the cost of food consumed by you or your family. 1040nr ez online 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. 1040nr ez online 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. 1040nr ez online 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. 1040nr ez online   If you deduct the actual cost of food for your daycare business, keep a separate record (with receipts) of your family's food costs. 1040nr ez online   Reimbursements you receive from a sponsor under the Child and Adult Care Food Program of the Department of Agriculture are taxable only to the extent they exceed your expenses for food for eligible children. 1040nr ez online If your reimbursements are more than your expenses for food, show the difference as income in Part I of Schedule C (Form 1040). 1040nr ez online If your food expenses are greater than the reimbursements, show the difference as an expense in Part V of Schedule C (Form 1040). 1040nr ez online Do not include payments or expenses for your own children if they are eligible for the program. 1040nr ez online Follow this procedure even if you receive a Form 1099-MISC, Miscellaneous Income, reporting a payment from the sponsor. 1040nr ez online Standard meal and snack rates. 1040nr ez online   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. 1040nr ez online For these purposes: A family daycare provider is a person engaged in the business of providing family daycare. 1040nr ez online Family daycare is childcare provided to eligible children in the home of the family daycare provider. 1040nr ez online The care must be non-medical, not involve a transfer of legal custody, and generally last less than 24 hours each day. 1040nr ez online Eligible children are minor children receiving family daycare in the home of the family daycare provider. 1040nr ez online 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. 1040nr ez online Eligible children do not include children who receive daycare services for personal reasons of the provider. 1040nr ez online For example, if a provider provides daycare services for a relative as a favor to that relative, that child is not an eligible child. 1040nr ez online   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. 1040nr ez online 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. 1040nr ez online 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. 1040nr ez online   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. 1040nr ez online 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. 1040nr ez online 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. 1040nr ez online   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. 1040nr ez online 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. 1040nr ez online This information can be recorded in a log similar to the one shown in Exhibit A, near the end of this publication. 1040nr ez online   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. 1040nr ez online These expenses can be claimed as a separate deduction on your Schedule C (Form 1040). 1040nr ez online     Table 3. 1040nr ez online Standard Meal and Snack Rates1 Location of Family Daycare Provider Breakfast Lunch Dinner Snack States other than Alaska an
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Understanding Your CP255 Notice

We need information to complete the termination of your private foundation status.


What you need to do

  • Complete Form 8940, Request for Miscellaneous Determination Under Section 507, 509(a), 4940, 4942, 4945, and 6033 of the Internal Revenue Code.
  • Return the completed form to us by the date indicated in your notice.

You may want to

Review the termination procedures for Private Foundations in Publication 4779, Facts about Terminating or Merging Your Exempt Organization.


Answers to Common Questions

Which organizations must file a Form 990-PF?
Form 990-PF must be filed by:

  • Exempt private foundations (section 6033(a), (b), and (c))
  • Taxable private foundations (section 6033(d))
  • Organizations that agree to private foundation status and their applications for exempt status are pending on the due date for filing
  • Organizations that made an election under section 41(e)(6)
  • Foundations that are making a section 507 termination
  • Section 4947(a)(1) nonexempt charitable trusts treated as private foundations (section 6033(d))

When is Form 990-PF due?
Form 990-PF is due by the 15th day of the 5th month following the close of the foundation's accounting period. For a calendar year taxpayer, Form 990-PF is due on May 15 of the following year. If any due date falls on a Saturday, Sunday, or legal holiday, the foundation can file the return on the next business day.

Can I get help over the phone?
If you have questions or need help completing the form, please call 1-877-829-5500. Personal assistance is available Monday through Friday, 7 a.m. to 7 p.m. CT.

Where can I go for more information about tax-exempt organizations?
For more information on tax-exempt organizations see Tax Information for Charities & Other Non-Profits or Tax Information for Private Foundations.


Tips for next year

Review the tax-exempt organization resources at Form 990 Resources and Tools for Exempt Organizations.


Understanding your notice

Your notice may look different from the sample because the information contained in your notice is tailored to your situation.

Notice CP255, Page 1

Page Last Reviewed or Updated: 09-Dec-2013

How to get help

  • Call the 1-800 number listed on the top right corner of your notice.
  • Authorize someone (e.g., accountant) to contact the IRS on your behalf using Form 2848.
  • See if you qualify for help from a Low Income Taxpayer Clinic.
     

The 1040nr Ez Online

1040nr ez online 5. 1040nr ez online   Table and Worksheets for the Self-Employed Table of Contents Community property laws. 1040nr ez online As discussed in chapters 2 and 4, if you are self-employed, you must use the rate table or rate worksheet and deduction worksheet to figure your deduction for contributions you made for yourself to a SEP-IRA or qualified plan. 1040nr ez online First, use either the rate table or rate worksheet to find your reduced contribution rate. 1040nr ez online Then complete the deduction worksheet to figure your deduction for contributions. 1040nr ez online The table and the worksheets in chapter 5 apply only to self-employed individuals who have only one defined contribution plan, such as a profit-sharing plan. 1040nr ez online A SEP plan is treated as a profit-sharing plan. 1040nr ez online However, do not use this worksheet for SARSEPs. 1040nr ez online Rate table for self-employed. 1040nr ez online   If your plan's contribution rate is a whole percentage (for example, 12% rather than 12½%), you can use the table on the next page to find your reduced contribution rate. 1040nr ez online Otherwise, use the rate worksheet provided below. 1040nr ez online   First, find your plan contribution rate (the contribution rate stated in your plan) in Column A of the table. 1040nr ez online Then read across to the rate under Column B. 1040nr ez online Enter the rate from Column B in step 4 of the Deduction Worksheet for Self-Employed on this page. 1040nr ez online    Example. 1040nr ez online You are a sole proprietor with no employees. 1040nr ez online If your plan's contribution rate is 10% of a participant's compensation, your rate is 0. 1040nr ez online 090909. 1040nr ez online Enter this rate in step 4 of the Deduction Worksheet for Self-Employed on this page. 1040nr ez online Deduction Worksheet for Self-Employed   Step 1           Enter your net profit from line 31, Schedule C (Form 1040); line 3, Schedule C-EZ (Form 1040); line 34, Schedule F (Form 1040)*; or box 14, code A**, Schedule K-1 (Form 1065)*. 1040nr ez online For information on other income included in net profit from self-employment, see the Instructions for Schedule SE, Form 1040. 1040nr ez online       *Reduce this amount by any amount reported on Schedule SE (Form 1040), line 1b. 1040nr ez online       **General partners should reduce this amount by the same additional expenses subtracted from box 14, code A to determine the amount on line 1 or 2 of Schedule SE. 1040nr ez online     Step 2           Enter your deduction for self-employment tax from Form 1040, line 27             Step 3           Net earnings from self-employment. 1040nr ez online Subtract step 2 from step 1     Step 4           Enter your rate from the Rate Table for Self-Employed or Rate Worksheet for Self-Employed     Step 5           Multiply step 3 by step 4     Step 6           Multiply $255,000 by your plan contribution rate (not the reduced rate)     Step 7           Enter the smaller of step 5 or step 6     Step 8           Contribution dollar limit $51,000     • If you made any elective deferrals to your self-employed plan, go to step 9. 1040nr ez online         • Otherwise, skip steps 9 through 20 and enter the smaller of step 7 or step 8 on step 21. 1040nr ez online       Step 9           Enter your allowable elective deferrals (including designated Roth contributions) made to your self-employed plan during 2013. 1040nr ez online Do not enter more than $17,500     Step 10           Subtract step 9 from step 8     Step 11           Subtract step 9 from step 3       Step 12           Enter one-half of step 11     Step 13           Enter the smallest of step 7, 10, or 12     Step 14           Subtract step 13 from step 3     Step 15           Enter the smaller of step 9 or step 14       • If you made catch-up contributions, go to step 16. 1040nr ez online         • Otherwise, skip steps 16 through 18 and go to step 19. 1040nr ez online       Step 16           Subtract step 15 from step 14     Step 17           Enter your catch-up contributions (including designated Roth contributions), if any. 1040nr ez online Do not enter more than $5,500     Step 18           Enter the smaller of step 16 or step 17     Step 19           Add steps 13, 15, and 18. 1040nr ez online     Step 20           Enter the amount of designated Roth contributions included on lines 9 and 17. 1040nr ez online     Step 21           Subtract step 20 from step 19. 1040nr ez online This is your maximum deductible contribution. 1040nr ez online                 Next: Enter your actual contribution, not to exceed your maximum deductible contribution, on Form 1040, line 28. 1040nr ez online   Rate worksheet for self-employed. 1040nr ez online   If your plan's contribution rate is not a whole percentage (for example, 10½%), you cannot use the Rate Table for Self-Employed. 1040nr ez online Use the following worksheet instead. 1040nr ez online Rate Worksheet for Self-Employed 1) Plan contribution rate as a decimal (for example, 10½% = 0. 1040nr ez online 105)   2) Rate in line 1 plus 1 (for example, 0. 1040nr ez online 105 + 1 = 1. 1040nr ez online 105)   3) Self-employed rate as a decimal rounded to at least 3 decimal places (line 1 ÷ line 2) (for example, 0. 1040nr ez online 105 ÷ 1. 1040nr ez online 105 = 0. 1040nr ez online 095)   Figuring your deduction. 1040nr ez online   Now that you have your self-employed rate from either the rate table or rate worksheet, you can figure your maximum deduction for contributions for yourself by completing the Deduction Worksheet for Self-Employed. 1040nr ez online Community property laws. 1040nr ez online   If you reside in a community property state and you are married and filing a separate return, disregard community property laws for step 1 of the Deduction Worksheet for Self-Employed. 1040nr ez online Enter on step 1 the total net profit you actually earned. 1040nr ez online Rate Table for Self-Employed Column A  If the plan contri- bution rate is: (shown as %) Column B  Your rate is: (shown as decimal) 1 . 1040nr ez online 009901 2 . 1040nr ez online 019608 3 . 1040nr ez online 029126 4 . 1040nr ez online 038462 5 . 1040nr ez online 047619 6 . 1040nr ez online 056604 7 . 1040nr ez online 065421 8 . 1040nr ez online 074074 9 . 1040nr ez online 082569 10 . 1040nr ez online 090909 11 . 1040nr ez online 099099 12 . 1040nr ez online 107143 13 . 1040nr ez online 115044 14 . 1040nr ez online 122807 15 . 1040nr ez online 130435 16 . 1040nr ez online 137931 17 . 1040nr ez online 145299 18 . 1040nr ez online 152542 19 . 1040nr ez online 159664 20 . 1040nr ez online 166667 21 . 1040nr ez online 173554 22 . 1040nr ez online 180328 23 . 1040nr ez online 186992 24 . 1040nr ez online 193548 25* . 1040nr ez online 200000* *The deduction for annual employer contributions (other than elective deferrals) to a SEP plan, a profit-sharing plan, or a money purchase plan cannot be more than 20% of your net earnings (figured without deducting contributions for yourself) from the business that has the plan. 1040nr ez online Example. 1040nr ez online You are a sole proprietor with no employees. 1040nr ez online The terms of your plan provide that you contribute 8½% (. 1040nr ez online 085) of your compensation to your plan. 1040nr ez online Your net profit from line 31, Schedule C (Form 1040) is $200,000. 1040nr ez online You have no elective deferrals or catch-up contributions. 1040nr ez online Your self-employment tax deduction on line 27 of Form 1040 is $9,728. 1040nr ez online See the filled-in portions of both Schedule SE (Form 1040), Self-Employment Income, and Form 1040, later. 1040nr ez online You figure your self-employed rate and maximum deduction for employer contributions you made for yourself as follows. 1040nr ez online Deduction Worksheet for Self-Employed   Step 1           Enter your net profit from line 31, Schedule C (Form 1040); line 3, Schedule C-EZ (Form 1040); line 34, Schedule F (Form 1040)*; or box 14, code A**, Schedule K-1 (Form 1065)*. 1040nr ez online For information on other income included in net profit from self-employment, see the Instructions for Schedule SE, Form 1040. 1040nr ez online $200,000     *Reduce this amount by any amount reported on Schedule SE (Form 1040), line 1b. 1040nr ez online       **General partners should reduce this amount by the same additional expenses subtracted from box 14, code A to determine the amount on line 1 or 2 of Schedule SE. 1040nr ez online     Step 2           Enter your deduction for self-employment tax from Form 1040, line 27 9,728           Step 3           Net earnings from self-employment. 1040nr ez online Subtract step 2 from step 1 190,272   Step 4           Enter your rate from the Rate Table for Self-Employed or Rate Worksheet for Self-Employed 0. 1040nr ez online 078   Step 5           Multiply step 3 by step 4 14,841   Step 6           Multiply $255,000 by your plan contribution rate (not the reduced rate) 21,675   Step 7           Enter the smaller of step 5 or step 6 14,841   Step 8           Contribution dollar limit $51,000     • If you made any elective deferrals to your self-employed plan, go to step 9. 1040nr ez online         • Otherwise, skip steps 9 through 20 and enter the smaller of step 7 or step 8 on step 21. 1040nr ez online       Step 9           Enter your allowable elective deferrals (including designated Roth contributions) made to your self-employed plan during 2013. 1040nr ez online Do not enter more than $17,500 N/A   Step 10           Subtract step 9 from step 8     Step 11           Subtract step 9 from step 3       Step 12           Enter one-half of step 11     Step 13           Enter the smallest of step 7, 10, or 12     Step 14           Subtract step 13 from step 3     Step 15           Enter the smaller of step 9 or step 14       • If you made catch-up contributions, go to step 16. 1040nr ez online         • Otherwise, skip steps 16 through 18 and go to step 19. 1040nr ez online       Step 16           Subtract step 15 from step 14     Step 17           Enter your catch-up contributions (including designated Roth contributions), if any. 1040nr ez online Do not enter more than $5,500     Step 18           Enter the smaller of step 16 or step 17     Step 19           Add steps 13, 15, and 18. 1040nr ez online     Step 20           Enter the amount of designated Roth contributions included on lines 9 and 17     Step 21           Subtract step 20 from step 19. 1040nr ez online This is your maximum deductible contribution $14,841                 Next: Enter your actual contribution, not to exceed your maximum deductible contribution, on Form 1040, line 28. 1040nr ez online   See the filled-in Deduction Worksheet for Self-Employed on this page. 1040nr ez online Rate Worksheet for Self-Employed 1) Plan contribution rate as a decimal (for example, 10½% = 0. 1040nr ez online 105) 0. 1040nr ez online 085 2) Rate in line 1 plus 1 (for example, 0. 1040nr ez online 105 + 1 = 1. 1040nr ez online 105) 1. 1040nr ez online 085 3) Self-employed rate as a decimal rounded to at least 3 decimal places (line 1 ÷ line 2) (for example, 0. 1040nr ez online 105 ÷ 1. 1040nr ez online 105 = 0. 1040nr ez online 095) 0. 1040nr ez online 078 This image is too large to be displayed in the current screen. 1040nr ez online Please click the link to view the image. 1040nr ez online Portion of Form 1040 and Portion of Schedule SE Prev  Up  Next   Home   More Online Publications