File your Taxes for Free!
  • Get your maximum refund*
  • 100% accurate calculations guaranteed*

TurboTax Federal Free Edition - File Taxes Online

Don't let filing your taxes get you down! We'll help make it as easy as possible. With e-file and direct deposit, there's no faster way to get your refund!

Approved TurboTax Affiliate Site. TurboTax and TurboTax Online, among others, are registered trademarks and/or service marks of Intuit Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.


© 2012 - 2018 All rights reserved.

This is an Approved TurboTax Affiliate site. TurboTax and TurboTax Online, among other are registered trademarks and/or service marks of Intuit, Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.
When discussing "Free e-file", note that state e-file is an additional fee. E-file fees do not apply to New York state returns. Prices are subject to change without notice. E-file and get your refund faster
*If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
*Maximum Refund Guarantee - or Your Money Back: If you get a larger refund or smaller tax due from another tax preparation method, we'll refund the applicable TurboTax federal and/or state purchase price paid. TurboTax Federal Free Edition customers are entitled to payment of $14.99 and a refund of your state purchase price paid. Claims must be submitted within sixty (60) days of your TurboTax filing date and no later than 6/15/14. E-file, Audit Defense, Professional Review, Refund Transfer and technical support fees are excluded. This guarantee cannot be combined with the TurboTax Satisfaction (Easy) Guarantee. *We're so confident your return will be done right, we guarantee it. Accurate calculations guaranteed. If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
https://turbotax.intuit.com/corp/guarantees.jsp

Search Irs

Free Tax Filing For UnemployedHow Do I Amend A Tax Return For 2010How To File A 1040x OnlineTurbo Tax 1040ezPenalties For Filing Taxes LateFiling State Taxes For Free1040nrWww.irs.gov Form 1040xWhere Can I File 2011 Taxes For FreeCan I Still File My 2012 Taxes OnlineHrblockHow To Do 1040xHow To Amend Your 2012 Tax ReturnFile Only My State TaxesIrs 1040 EzHow To Do 1040ez Tax FormIrs1040ez 2011 FormHow Do I File A 2010 Tax Return1040nr Filing OnlineHow To File An Amended Tax Return For 2012Tax Amendments 2013 14File Taxes IncomeOnline Amended Tax ReturnIrs Gov Form 1040xFederal Income Tax Ez Form 2011How To File A Amended Tax ReturnHow Do I File An Amended ReturnAmend 2011 Tax Return OnlineHow To Amend Taxes OnlineIrs 1040ez Form 2011Form 1040How To File An Amended Tax Return For 20132010 Tax ActIrs Gov Form 1040ezIrs 1040x Amended ReturnHow Do You Amend Your Taxes OnlineFree Online Tax Filing Federal And StateFree H And R Block Military1040ez 2011 Tax Form

Search Irs

Search irs Publication 560 - Additional Material This image is too large to be displayed in the current screen. Search irs Please click the link to view the image. Search irs Tax Publications Prev  Up  Next   Home   More Online Publications
Español

Missile Defense Agency (MDA)

The Missile Defense Agency is a research, development, and acquisition agency that works on ballistic missile defense systems for the United States and its allies.

Contact the Agency or Department

Website: Missile Defense Agency (MDA)

E-mail:

Address: 5700 18th St
Bldg 245

Fort Belvoir, VA 22060-5573

The Search Irs

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