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

Hrblock freereturn Index A Accelerated Cost Recovery System (ACRS), MACRS Depreciation (see also Modified Accelerated Cost Recovery System (MACRS)) Effective date, Depreciation Methods Accounting methods Accrual method, Accrual method. Hrblock freereturn Cash method, Cash method. Hrblock freereturn Change of method, Changing your accounting method. Hrblock freereturn Constructive receipt of income, Cash method. Hrblock freereturn , More information. Hrblock freereturn Accrual method taxpayers, Accrual method. Hrblock freereturn ACRS (Accelerated Cost Recovery System) Effective date, Depreciation Methods Active participation, Active participation. Hrblock freereturn Activities not for profit, Duplex. Hrblock freereturn Additions to property, Additions or improvements to property. Hrblock freereturn (see also Improvements) Basis, Increases to basis. Hrblock freereturn , Additions or improvements. Hrblock freereturn MACRS recovery period, Additions or improvements to property. Hrblock freereturn Adjusted basis MACRS depreciation, Adjusted Basis Adjusted gross income (AGI) Modified (see Modified adjusted gross income (MAGI)) Advance rent, Advance rent. Hrblock freereturn Security deposits, Security deposits. Hrblock freereturn Advertising, Types of Expenses Allocation of expenses Change of property to rental use, Payments added to capital account. Hrblock freereturn How to divide expenses, Dividing Expenses Part of property rented, Renting Part of Property, How to divide expenses. Hrblock freereturn Personal use of rental property, Personal use of rental property. Hrblock freereturn , Personal Use of Dwelling Unit (Including Vacation Home) Alternative Depreciation System (ADS) Election of, Electing ADS MACRS, MACRS Depreciation, Table 2-2d. Hrblock freereturn Alternative minimum tax (AMT) Accelerated depreciation methods, Alternative minimum tax (AMT). Hrblock freereturn Amended returns, Filing an amended return. Hrblock freereturn Apartments Basement apartments, Examples. Hrblock freereturn Dwelling units, Dwelling unit. Hrblock freereturn Appraisal fees, Settlement fees and other costs. Hrblock freereturn Assessments for maintenance, Assessments for local improvements. Hrblock freereturn Assessments, local (see Local assessments) Assistance (see Tax help) Assumption of mortgage, Assumption of a mortgage. Hrblock freereturn Attorneys' fees, Settlement fees and other costs. Hrblock freereturn , Increases to basis. Hrblock freereturn Automobiles MACRS recovery periods, Property Classes Under GDS B Basis Adjusted basis, Adjusted Basis Assessments for local improvements, Assessments for local improvements. Hrblock freereturn Basis other than cost, Basis Other Than Cost Cost basis, Cost Basis Decreases to, Decreases to basis. Hrblock freereturn Deductions Capitalization of costs vs. Hrblock freereturn , Deducting vs. Hrblock freereturn capitalizing costs. Hrblock freereturn Not greater than basis, Cost or Other Basis Fully Recovered Fair market value, Fair market value. Hrblock freereturn Increases to, Increases to basis. Hrblock freereturn MACRS depreciable basis, Basis of Depreciable Property Property changed to rental use, Basis of Property Changed to Rental Use C Capital expenditures Deductions vs. Hrblock freereturn effect on basis, Deducting vs. Hrblock freereturn capitalizing costs. Hrblock freereturn Local benefit taxes, Local benefit taxes. Hrblock freereturn Mortgages, payments to obtain, Expenses paid to obtain a mortgage. Hrblock freereturn Cars MACRS recovery periods, Property Classes Under GDS Cash method taxpayers, Cash method. Hrblock freereturn Casualty losses, Exception for Rental Real Estate With Active Participation Change of accounting method, Changing your accounting method. Hrblock freereturn Charitable contributions Use of property, Donation of use of the property. Hrblock freereturn Cleaning and maintenance, Types of Expenses Closing costs, Settlement fees and other costs. Hrblock freereturn Commissions, Types of Expenses Computers MACRS recovery periods, Property Classes Under GDS Condominiums, Condominiums, Dwelling unit. Hrblock freereturn Constructive receipt of income, Cash method. Hrblock freereturn , More information. Hrblock freereturn Cooperative housing, Cooperative apartments. Hrblock freereturn , Cooperatives, Dwelling unit. Hrblock freereturn Cost basis, Cost Basis Credit reports, Settlement fees and other costs. Hrblock freereturn Credits Residential energy credits, Decreases to basis. Hrblock freereturn D Days of personal use, What is a day of personal use? Days used for repairs and maintenance, Days used for repairs and maintenance. Hrblock freereturn Deductions Capitalizing costs vs. Hrblock freereturn effect on basis, Deducting vs. Hrblock freereturn capitalizing costs. Hrblock freereturn Depreciation (see Depreciation) Limitations on, Form 4562. Hrblock freereturn Passive activity losses (see Passive activity) Depreciation, Depreciation of Rental Property, Changing your accounting method. Hrblock freereturn Alternative Depreciation System (ADS) (see Modified Accelerated Cost Recovery System (MACRS)) Basis (see Basis) Change of accounting method, Changing your accounting method. Hrblock freereturn Change of property to rental use, Property Changed to Rental Use Claiming correct amount of, Claiming the Correct Amount of Depreciation Declining balance method, Depreciation Methods Duration of property expected to last more than one year, What Rental Property Can Be Depreciated? Eligible property, What Rental Property Can Be Depreciated? First-year expensing, Section 179 deduction. Hrblock freereturn MACRS (see Modified Accelerated Cost Recovery System (MACRS)) Methods, Depreciation Methods, Figuring Your Depreciation Deduction Ownership of property, What Rental Property Can Be Depreciated?, Property you own. Hrblock freereturn Rental expense, Depreciation. Hrblock freereturn Rented property, Rented property. Hrblock freereturn Section 179 deduction, Section 179 deduction. Hrblock freereturn Special depreciation allowances, Claiming the Special Depreciation Allowance Straight line method, Depreciation Methods Useful life, What Rental Property Can Be Depreciated?, Property having a determinable useful life. Hrblock freereturn Vacant rental property, Vacant rental property. Hrblock freereturn Discount, bonds and notes issued at (see Original issue discount (OID)) Dividing of expenses (see Allocation of expenses) Dwelling units Definition, Dwelling unit. Hrblock freereturn Fair rental price, Fair rental price. Hrblock freereturn Personal use of, Personal Use of Dwelling Unit (Including Vacation Home), What is a day of personal use? E Easements, Decreases to basis. Hrblock freereturn Equipment rental expense, Rental of equipment. Hrblock freereturn F Fair market value (FMV), Fair market value. Hrblock freereturn Fair rental price, Dividing Expenses, Fair rental price. Hrblock freereturn Fees Loan origination fees, Points, Settlement fees and other costs. Hrblock freereturn Points (see Points) Settlement fees and other costs, Settlement fees and other costs. Hrblock freereturn Tax return preparation fees, Legal and other professional fees. Hrblock freereturn First-year expensing, Section 179 deduction. Hrblock freereturn Form 1040 Not rented for profit income, Where to report. Hrblock freereturn Part of property rented, Renting Part of Property Rental income and expenses, Reporting Rental Income, Expenses, and Losses Schedule E, Schedule E (Form 1040) Form 1098 Mortgage interest, Form 1098, Mortgage Interest Statement. Hrblock freereturn Form 4684 Casualties and thefts, How to report. Hrblock freereturn Form 4797 Sales of business property, How to report. Hrblock freereturn Form 8582 Passive activity losses, Form 8582. Hrblock freereturn , Form 8582 not required. Hrblock freereturn Free tax services, Free help with your tax return. Hrblock freereturn G Gains and losses At-risk rules, At-Risk Rules Casualty and theft losses, Exception for Rental Real Estate With Active Participation Limits on rental losses, Form 4562. Hrblock freereturn Passive activity losses, Passive Activity Limits Rental real estate activities, Exception for Rental Real Estate With Active Participation Sale of rental property, Sale or exchange of rental property. Hrblock freereturn , How to report. Hrblock freereturn General depreciation system (GDS) (see Modified Accelerated Cost Recovery System (MACRS)) H Help (see Tax help) Home Main home, Main home. Hrblock freereturn Use as rental property (see Use of home) I Improvements, Table 1-1. Hrblock freereturn Examples of Improvements (see also Repairs) Assessments for local improvements, Assessments for local improvements. Hrblock freereturn Basis, Increases to basis. Hrblock freereturn , Additions or improvements. Hrblock freereturn Depreciation of rented property, Rented property. Hrblock freereturn MACRS recovery period, Additions or improvements to property. Hrblock freereturn Insurance, Types of Expenses Casualty or theft loss payments, Decreases to basis. Hrblock freereturn Change of property to rental use, Property Changed to Rental Use Fire insurance premiums, cost basis, Settlement fees and other costs. Hrblock freereturn Part of property rented, Renting Part of Property Premiums paid in advance, Insurance premiums paid in advance. Hrblock freereturn Title insurance, cost basis, Settlement fees and other costs. Hrblock freereturn Interest payments, Interest expense. Hrblock freereturn (see also Mortgages) Loan origination fees, Points Rental expenses, Types of Expenses L Land Cost basis, Separating cost of land and buildings. Hrblock freereturn Depreciation, Land. Hrblock freereturn Leases Cancellation payments, Canceling a lease. Hrblock freereturn Equipment leasing, Rental of equipment. Hrblock freereturn Limits Passive activity losses and credits, Passive Activity Limits Rental losses, Limits on Rental Losses Loans Assumption fees, Settlement fees and other costs. Hrblock freereturn Charges connected with getting or refinancing, cost basis, Settlement fees and other costs. Hrblock freereturn Low or no interest, Loans with low or no interest. Hrblock freereturn Origination fees, Points Local assessments, Assessments for local improvements. Hrblock freereturn Losses (see Gains and losses) M Missing children, photographs of, Reminders Modified Accelerated Cost Recovery System (MACRS), MACRS Depreciation, Figuring MACRS Depreciation Under ADS Additions or improvements to property, Additions or improvements to property. Hrblock freereturn Adjusted basis, Adjusted Basis Alternative Depreciation System (ADS), MACRS Depreciation, Figuring MACRS Depreciation Under ADS Basis other than cost, Basis Other Than Cost Conventions, Conventions Cost basis, Cost Basis Depreciable basis, Basis of Depreciable Property Effective date, Depreciation Methods Excluded property, Excluded Property General Depreciation System (GDS), MACRS Depreciation, Property Classes Under GDS, Figuring Your Depreciation Deduction Nonresidential rental property, Property Classes Under GDS Property used in rental activities (Table 2-1), Table 2-1. Hrblock freereturn MACRS Recovery Periods for Property Used in Rental Activities Recovery periods, Table 2-1. Hrblock freereturn MACRS Recovery Periods for Property Used in Rental Activities, 5-, 7-, or 15-year property. Hrblock freereturn Residential rental property, Property Classes Under GDS, Residential rental property. Hrblock freereturn Special depreciation allowances, Claiming the Special Depreciation Allowance Modified adjusted gross income (MAGI), Modified adjusted gross income (MAGI). Hrblock freereturn Mortgages, Expenses paid to obtain a mortgage. Hrblock freereturn Assumption of, cost basis, Assumption of a mortgage. Hrblock freereturn Change of property to rental use, Property Changed to Rental Use End of, OID, Loan or mortgage ends. Hrblock freereturn Interest, Interest expense. Hrblock freereturn , Property Changed to Rental Use, Renting Part of Property Mortgage insurance premiums, Settlement fees and other costs. Hrblock freereturn Part of property rented, Renting Part of Property N Nonresidential real property, Property Classes Under GDS Not-for-profit activities, Duplex. Hrblock freereturn O Original issue discount (OID), Points, Loan or mortgage ends. Hrblock freereturn P Part interest Expenses, Part interest. Hrblock freereturn Income, Part interest. Hrblock freereturn Passive activity Maximum special allowance, Maximum special allowance. Hrblock freereturn Personal property Rental income from, Property or services. Hrblock freereturn Personal use of rental property, Payments added to capital account. Hrblock freereturn , Personal Use of Dwelling Unit (Including Vacation Home) (see also Property changed to rental use) Placed-in-service date, Placed in Service Points, Types of Expenses, Points, Settlement fees and other costs. Hrblock freereturn Pre-rental expenses, Pre-rental expenses. Hrblock freereturn Principal residence (see Home) Profit, property not rented for, Duplex. Hrblock freereturn Property changed to rental use, Payments added to capital account. Hrblock freereturn Basis, Basis of Property Changed to Rental Use Publications (see Tax help) R Real estate professionals, Real estate professionals. Hrblock freereturn Real estate taxes, Real estate taxes. Hrblock freereturn Real property trades or businesses, Real property trades or businesses. Hrblock freereturn Recordkeeping requirements Travel and transportation expenses, Local transportation expenses. Hrblock freereturn , Travel expenses. Hrblock freereturn Recovery periods, Property Classes Under GDS Rent, Settlement fees and other costs. Hrblock freereturn Advance rent, Advance rent. Hrblock freereturn Fair price, Fair rental price. Hrblock freereturn Rental expenses, Rental Expenses Advertising, Types of Expenses Allocation between rental and personal uses, Dividing Expenses Change of property to rental use, Property Changed to Rental Use Cleaning and maintenance, Types of Expenses Commissions, Types of Expenses Depreciation, Depreciation. Hrblock freereturn Dwelling unit used as home, Dwelling Unit Used as a Home Equipment rental, Rental of equipment. Hrblock freereturn Home, property also used as, Rental of property also used as your home. Hrblock freereturn Improvements, Table 1-1. Hrblock freereturn Examples of Improvements Insurance, Types of Expenses, Insurance premiums paid in advance. Hrblock freereturn Interest payments, Types of Expenses, Interest expense. Hrblock freereturn Local transportation expenses, Types of Expenses, Local transportation expenses. Hrblock freereturn Part of property rented, Renting Part of Property Points, Types of Expenses, Points Pre-rental expenses, Pre-rental expenses. Hrblock freereturn Rental payments, Types of Expenses Repairs, Types of Expenses, Repairs and Improvements Sale of property, Vacant while listed for sale. Hrblock freereturn Tax return preparation fees, Legal and other professional fees. Hrblock freereturn Taxes, Types of Expenses Tenant, paid by, Expenses paid by tenant. Hrblock freereturn Travel expenses, Types of Expenses Utilities, Types of Expenses Vacant rental property, Vacant rental property. Hrblock freereturn Rental income Advance rent, Advance rent. Hrblock freereturn Cancellation of lease payments, Canceling a lease. Hrblock freereturn Dwelling unit used as home, Dwelling Unit Used as a Home Lease with option to buy, Lease with option to buy. Hrblock freereturn Not rented for profit, Not Rented for Profit Part interest, Part interest. Hrblock freereturn Property received from tenant, Property or services. Hrblock freereturn Reporting, Accrual method. Hrblock freereturn , Which Forms To Use Security deposit, Security deposits. Hrblock freereturn Services received from tenant, Property or services. Hrblock freereturn Uncollected rent, Uncollected rent. Hrblock freereturn Used as home, Rental of property also used as your home. Hrblock freereturn Rental losses, Exception for Rental Real Estate With Active Participation (see also Gains and losses) (see also Passive activity) Repairs, Types of Expenses, Repairs and Improvements (see also Improvements) Assessments for maintenance, Assessments for local improvements. Hrblock freereturn Personal use of rental property exception for days used for repairs and maintenance, Days used for repairs and maintenance. Hrblock freereturn S Sale of property Expenses, Vacant while listed for sale. Hrblock freereturn Gain or loss, Sale or exchange of rental property. Hrblock freereturn , How to report. Hrblock freereturn Main home, Sale of main home used as rental property. Hrblock freereturn Section 179 deductions, Section 179 deduction. Hrblock freereturn Security deposits, Security deposits. Hrblock freereturn Settlement fees, Settlement fees and other costs. Hrblock freereturn Shared equity financing agreements, Shared equity financing agreement. Hrblock freereturn Special depreciation allowances, Claiming the Special Depreciation Allowance Spouse Material participation, Participating spouse. Hrblock freereturn Standard mileage rates, Local transportation expenses. Hrblock freereturn Surveys, Settlement fees and other costs. Hrblock freereturn T Tables and figures Improvements, examples of (Table 1-1), Table 1-1. Hrblock freereturn Examples of Improvements MACRS optional tables (Table 2-2d), Table 2-2d. Hrblock freereturn MACRS optional tables (Tables 2-2a, 2-2b, and 2-2c), Tables 2-2a, 2-2b, and 2-2c. Hrblock freereturn MACRS recovery periods for property used in rental activities (Table 2-1), Table 2-1. Hrblock freereturn MACRS Recovery Periods for Property Used in Rental Activities Tax credits Residential energy credits, effect on basis, Decreases to basis. Hrblock freereturn Tax help, How To Get Tax Help Tax return preparation fees, Legal and other professional fees. Hrblock freereturn Taxes Deduction of, Types of Expenses Local benefit taxes, Local benefit taxes. Hrblock freereturn Real estate taxes, Real estate taxes. Hrblock freereturn Transfer taxes, Settlement fees and other costs. Hrblock freereturn Theft losses, Theft. Hrblock freereturn Title insurance, Settlement fees and other costs. Hrblock freereturn Transfer taxes, Settlement fees and other costs. Hrblock freereturn Travel and transportation expenses Local transportation expenses, Types of Expenses, Local transportation expenses. Hrblock freereturn Recordkeeping, Travel expenses. Hrblock freereturn Rental expenses, Types of Expenses Standard mileage rate, Local transportation expenses. Hrblock freereturn U Uncollected rent Income, Uncollected rent. Hrblock freereturn Use of home Before or after renting, Days used as a main home before or after renting. Hrblock freereturn Change to rental use, Property Changed to Rental Use Days of personal use, What is a day of personal use? Fair rental price, Fair rental price. Hrblock freereturn Passive activity rules exception, Exception for Personal Use of Dwelling Unit Personal use as dwelling unit, Personal Use of Dwelling Unit (Including Vacation Home) Utilities, Types of Expenses, Increases to basis. Hrblock freereturn V Vacant rental property, Vacant rental property. Hrblock freereturn Vacation homes Dwelling unit, Dwelling unit. Hrblock freereturn Fair rental price, Fair rental price. Hrblock freereturn Personal use of, Personal Use of Dwelling Unit (Including Vacation Home) Valuation Fair market value, Fair market value. Hrblock freereturn Prev  Up     Home   More Online Publications