8861 Welfare-To-Work Credit

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8829

Department of the Treasury
Internal Revenue Service (99)

Name(s) of proprietor(s)

Part I
1
2
3

4
5
6
7

©

File only with Schedule C (Form 1040). Use a separate Form 8829 for each
home you used for business during the year.

35
36
37
38
39
40

See separate instructions.

2006

Attachment
Sequence No. 66
Your social security number

Part of Your Home Used for Business

1
2
3

%

7

%

Figure Your Allowable Deduction

(a) Direct expenses

8

(b) Indirect expenses

9
Casualty losses (see instructions)
10
Deductible mortgage interest (see instructions)
11
Real estate taxes (see instructions)
12
Add lines 9, 10, and 11
13
Multiply line 12, column (b) by line 7
Add line 12, column (a) and line 13
Subtract line 14 from line 8. If zero or less, enter -016
Excess mortgage interest (see instructions)
17
Insurance
18
Repairs and maintenance
19
Utilities
20
Other expenses (see instructions)
21
Add lines 16 through 20
22
Multiply line 21, column (b) by line 7
23
Carryover of operating expenses from 2005 Form 8829, line 41
Add line 21 in column (a), line 22, and line 23
Allowable operating expenses. Enter the smaller of line 15 or line 24
Limit on excess casualty losses and depreciation. Subtract line 25 from line 15
27
Excess casualty losses (see instructions)
28
Depreciation of your home from Part III below
29
Carryover of excess casualty losses and depreciation from 2005 Form 8829, line 42

14
15

24
25
26

Add lines 27 through 29
Allowable excess casualty losses and depreciation. Enter the smaller of line 26 or line 30
Add lines 14, 25, and 31
Casualty loss portion, if any, from lines 14 and 31. Carry amount to Form 4684, Section B
Allowable expenses for business use of your home. Subtract line 33 from line 32. Enter here
and on Schedule C, line 30. If your home was used for more than one business, see instructions ©

30
31
32
33
34

Depreciation of Your Home

Enter the smaller of your home’s adjusted basis or its fair market value (see instructions)
Value of land included on line 35
Basis of building. Subtract line 36 from line 35
Business basis of building. Multiply line 37 by line 7
Depreciation percentage (see instructions)
Depreciation allowable (see instructions). Multiply line 38 by line 39. Enter here and on line 28 above

Part IV
41
42

OMB No. 1545-0074

f
o
s
a
6
t
0
f
0
a
2
r
/
D /01
6
0
©

Enter the amount from Schedule C, line 29, plus any net gain or (loss) derived from the business use of
your home and shown on Schedule D or Form 4797. If more than one place of business, see instructions

Part III

Signature

Revised proofs
requested

Expenses for Business Use of Your Home

See instructions for columns (a) and (b) before
completing lines 9–20.

9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34

Date

O.K. to print

Area used regularly and exclusively for business, regularly for daycare, or for storage of inventory
or product samples (see instructions)
Total area of home
Divide line 1 by line 2. Enter the result as a percentage
● For daycare facilities not used exclusively for business, also complete lines 4–6.
● All others, skip lines 4–6 and enter the amount from line 3 on line 7.
4
hr.
Multiply days used for daycare during year by hours used per day
5
8,760
hr.
Total hours available for use during the year (365 days 3 24 hours) (see instructions)
6
.
Divide line 4 by line 5. Enter the result as a decimal amount
Business percentage. For daycare facilities not used exclusively for business, multiply line 6 by
©
line 3 (enter the result as a percentage). All others, enter the amount from line 3

Part II
8

Action

35
36
37
38
39
40

%

Carryover of Unallowed Expenses to 2007

Operating expenses. Subtract line 25 from line 24. If less than zero, enter -0Excess casualty losses and depreciation. Subtract line 31 from line 30. If less than zero, enter -0-

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41
42
Form

8829

(2006)

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Page 1 of 4

Instructions for Form 8829

11:08 - 4-NOV-2005

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

2005

Department of the Treasury
Internal Revenue Service

Instructions for Form 8829
Expenses for Business Use of Your Home
Section references are to the Internal Revenue Code.

General Instructions
Note. If you are claiming expenses for business use of
your home as an employee or a partner, or you are
claiming these expenses on Schedule F (Form 1040), do
not use Form 8829. Instead, complete the worksheet in
Pub. 587, Business Use of Your Home (Including Use by
Daycare Providers).

Purpose of Form
Use Form 8829 to figure the allowable expenses for
business use of your home on Schedule C (Form 1040)
and any carryover to 2006 of amounts not deductible in
2005.
If all of the expenses for business use of your home
are properly allocable to inventory costs, do not complete
Form 8829. These expenses are figured in Schedule C,
Part III, and not on Form 8829.
You must meet specific requirements to deduct
expenses for the business use of your home. Even if you
meet these requirements, your deductible expenses may
be limited. Part IV is used to figure any allowable
carryover of expenses that are more than the limit. For
details, see Publication 587.

Who Can Deduct Expenses for
Business Use of a Home
Generally, you can deduct business expenses that apply
to a part of your home only if that part is exclusively used
on a regular basis:
• As your principal place of business for any of your
trades or businesses,
• As a place of business used by your patients, clients,
or customers to meet or deal with you in the normal
course of your trade or business, or
• In connection with your trade or business if it is a
separate structure that is not attached to your home.
As explained on this page, exceptions to this rule
apply to space used on a regular basis for:
• Storage of inventory or product samples, and
• Certain daycare facilities.

Your home office will qualify as your principal place of
business if you meet the following requirements.
• You use it exclusively and regularly for administrative
or management activities of your trade or business.
• You have no other fixed location where you conduct
substantial administrative or management activities of
your trade or business.
Administrative or management activities. There are
many activities that are administrative or managerial in
nature. The following are a few examples.
• Billing customers, clients, or patients.
• Keeping books and records.
• Ordering supplies.
• Setting up appointments.
• Forwarding orders or writing reports.
Administrative or management activities performed
at other locations. The following activities performed by
you or others will not disqualify your home office from
being your principal place of business.
• You have others conduct your administrative or
management activities at locations other than your home.
(For example, another company does your billing from its
place of business.)
• 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.
• You occasionally conduct minimal administrative or
management activities at a fixed location outside your
home.
• You conduct substantial nonadministrative or
nonmanagement business activities at a fixed location
outside your home. (For example, you meet with or
provide services to customers, clients, or patients at a
fixed location of the business outside your home.)
• You have suitable space to conduct administrative or
management activities outside your home, but choose to
use your home office for those activities instead.
More information. For information on other ways to
qualify to deduct business use of the home expenses,
see Pub. 587.

Storage of Inventory or Product Samples

Principal Place of Business
In determining whether the office in your home qualifies
as your principal place of business, you must consider
the following two items.
• 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.

You can also deduct expenses that apply to space within
your home used on a regular basis to store inventory or
product samples from your trade or business of selling
products at retail or wholesale. Your home must be the
only fixed location of your trade or business.

Daycare Facilities
If you use space in your home on a regular basis in the
trade or business of providing daycare, you may be able
to deduct the business expenses even though you use

Cat. No. 15683B

Page 2 of 4

Instructions for Form 8829

11:08 - 4-NOV-2005

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

the same space for nonbusiness purposes. To qualify for
this exception, you must have applied for (and not have
been rejected), been granted (and still have in effect), 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.

Line 5

Expenses Related to Tax-Exempt Income

Part II

If you started or stopped using your home for daycare in
2005, you must prorate the number of hours based on
the number of days the home was available for daycare.
Cross out the preprinted entry on line 5. Multiply 24 hours
by the number of days available and enter the result.

Generally, you cannot deduct expenses that are allocable
to tax-exempt income. However, if you receive a
tax-exempt parsonage allowance or a tax-exempt military
housing allowance, your expenses for mortgage interest
and real property taxes are deductible under the normal
rules. No deduction is allowed for other expenses
allocable to the tax-exempt allowance.

Line 8
If all the gross income from your trade or business is from
the business use of your home, enter on line 8 the
amount from Schedule C, line 29, plus any net gain or
(loss) derived from the business use of your home and
shown on Schedule D or Form 4797. If you file more than
one Form 8829, include only the income earned and the
deductions attributable to that income during the period
you owned the home for which Part I was completed.
If some of the income is from a place of business other
than your home, you must first determine the part of your
gross income (Schedule C, line 7, and gains from
Schedule D and Form 4797) from the business use of
your home. In making this determination, consider the
amount of time you spend at each location as well as
other facts. After determining the part of your gross
income from the business use of your home, subtract
from that amount the total expenses shown on Schedule
C, line 28, plus any losses from your business shown on
Schedule D or Form 4797. Enter the result on Form
8829, line 8.

Specific Instructions
Part I
Lines 1 and 2
To determine the area on lines 1 and 2, you can use
square feet or any other reasonable method if it
accurately figures your business percentage on line 7.
Do not include on line 1 the area of your home you
used to figure any expenses allocable to inventory costs.
The business percentage of these expenses should have
been taken into account in Schedule C, Part III.

Columns (a) and (b)
Special Computation for Certain Daycare
Facilities

Enter as direct or indirect expenses only expenses for the
business use of your home (that is, expenses allowable
only because your home is used for business). If you did
not operate a business for the entire year, you can
deduct only the expenses paid or incurred for the portion
of the year you used your home for business. Other
expenses not allocable to the business use of your home,
such as salaries, supplies, and business telephone
expenses, are deductible elsewhere on Schedule C and
should not be entered on Form 8829.
Direct expenses benefit only the business part of your
home. They include painting or repairs made to the
specific area or rooms used for business. Enter 100% of
your direct expenses on the appropriate line in
column (a).
Indirect expenses are for keeping up and running your
entire home. They benefit both the business and
personal parts of your home. Generally, enter 100% of
your indirect expenses on the appropriate line in
column (b).
Exception. If the business percentage of an indirect
expense is different from the percentage on line 7, enter
only the business part of the expense on the appropriate
line in column (a), and leave that line in column (b) blank.
For example, your electric bill is $800 for lighting,
cooking, laundry, and television. If you reasonably
estimate $300 of your electric bill is for lighting and you
use 10% of your home for business, enter $30 on line 19
in column (a). Do not make an entry on line 19 in column
(b) for any part of your electric bill.

If the part of your home used as a daycare facility
included areas used exclusively for business as well as
other areas used only partly for business, you cannot
figure your business percentage using Part I. Instead,
follow these three steps:
1. Figure the business percentage of the part of your
home used exclusively for business by dividing the area
used exclusively for business by the total area of the
home.
2. Figure the business percentage of the part of your
home used only partly for business by following the same
method used in Part I of the form, but enter on line 1 of
your computation only the area of the home used partly
for business.
3. Add the business percentages you figured in the
first two steps and enter the result on line 7. Attach your
computation and enter “See attached computation”
directly above the percentage you entered on line 7.

Line 4
Enter the total number of hours the facility was used for
daycare during the year.
Example. Your home is used Monday through Friday
for 12 hours per day for 250 days during the year. It is
also used on 50 Saturdays for 8 hours per day. Enter
3,400 hours on line 4 (3,000 hours for weekdays plus 400
hours for Saturdays).
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Page 3 of 4

Instructions for Form 8829

11:08 - 4-NOV-2005

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Lines 9, 10, and 11

Part III

Enter only the amounts that would be deductible whether
or not you used your home for business (that is, amounts
allowable as itemized deductions on Schedule A (Form
1040)).

Lines 35 Through 37
Enter on line 35 the cost or other basis of your home, or,
if less, the fair market value of your home on the date you
first used the home for business. Do not adjust this
amount for depreciation claimed or changes in fair
market value after the year you first used your home for
business. Allocate this amount between land and building
values on lines 36 and 37.

Treat casualty losses as personal expenses for this
step. Figure the amount to enter on line 9 by completing
Form 4684, Section A. When figuring Form 4684, line 19,
enter 10% of your adjusted gross income excluding the
gross income from business use of your home and the
deductions attributable to that income. If your loss
occurred after August 24, 2005, and was the result of
Hurricane Katrina, enter zero on line 19. Include on Form
8829, line 9, the amount from Form 4684, line 21. See
Line 27 below to deduct part of the casualty losses not
allowed because of the limits on Form 4684.

Attach your own schedule showing the cost or other
basis of additions and improvements placed in service
after you began to use your home for business. Do not
include any amounts on lines 35 through 38 for these
expenditures. Instead, see the instructions for line 40.

Do not file or use that Form 4684 to figure the amount
of casualty losses to deduct on Schedule A. Instead,
complete a separate Form 4684 to deduct the personal
portion of your casualty losses.

Line 39
IF you first used your home THEN enter the following
for business in the following percentage on line 39*...
month in 2005...

On line 10, include only mortgage interest that would
be deductible on Schedule A and that qualifies as a direct
or indirect expense. Do not include interest on a
mortgage loan that did not benefit your home (for
example, a home equity loan used to pay off credit card
bills, to buy a car, or to pay tuition costs).
If you itemize your deductions, be sure to claim only
the personal portion of your deductible mortgage interest
and real estate taxes on Schedule A. For example, if your
business percentage on line 7 is 30%, you can claim
70% of your deductible mortgage interest and real estate
taxes on Schedule A.

Line 16
If the amount of home mortgage interest you deduct on
Schedule A is limited, enter the part of the excess
mortgage interest that qualifies as a direct or indirect
expense. Do not include mortgage interest on a loan that
did not benefit your home (explained earlier).

January

2.461%

February

2.247%

March

2.033%

April

1.819%

May

1.605%

June

1.391%

July

1.177%

August

0.963%

September

0.749%

October

0.535%

November

0.321%

December

0.107%

Line 20
Include on this line any 2005 operating expenses not
included on lines 9 through 19.

IF you first used your home
for business...

THEN the percentage to
enter on line 39 is...

If you rent rather than own your home, include the rent
you paid on line 20, column (b). 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.

after May 12, 1993, and before 2.564%*.
2005 (except as noted below)
after May 12, 1993, and before the percentage given in
1994, and you either started
Pub. 946.
construction or had a binding
contract to buy or build that
home before May 13, 1993,

Line 27
Multiply your casualty losses in excess of the amount on
line 9 by the business percentage of those losses and
enter the result.

after May 12, 1993, and you
stopped using your home for
business before the end of the
year

Line 34
If your home was used in more than one business,
allocate the amount shown on line 34 to each business
using any method that is reasonable under the
circumstances. For each business, enter on Schedule C,
line 30, only the amount allocated to that business.

the percentage given in
Pub. 946 as adjusted by the
instructions under Sale or
Other Disposition Before the
Recovery Period Ends in that
publication.

after 1986 and before May 13, the percentage given in
1993,
Pub. 946.

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Page 4 of 4

Instructions for Form 8829

11:08 - 4-NOV-2005

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

IF you first used your home
for business...

THEN the percentage to
enter on line 39 is...

before 1987,

the percentage given in
Pub. 534, Depreciating
Property Placed in Service
Before 1987.

columns (c) and (g) of line 19i, Form 4562. In column (b)
of line 19i, enter the month and year you first used your
home for business. Do not include the amount from Form
8829, line 40, on Schedule C, line 13.
If you are depreciating additions and improvements
placed in service in 2005, enter in column (b) of line 19i
on Form 4562 the month and year the additions or
improvements were placed in service. Enter the business
basis of the additions or improvements in column (c) and
the depreciation allowable on the additions or
improvements in column (g). Do not include the amount
entered in column (g) on Schedule C, line 13.

*Exception. If the business part of your home is qualified Indian
reservation property (as defined in section 168(j)(4)), see Pub. 946,
How To Depreciate Property, to figure the depreciation.

Line 40
If no additions and improvements were placed in service
after you began using your home for business, multiply
line 38 by the percentage on line 39. Enter the result on
lines 40 and 28.
IF additions and
improvements were placed
in service...

during 2005 (but after you
began using your home for
business)

Part IV
If your expenses are greater than the current year’s limit,
you can carry over the excess to 2006. The carryover will
be subject to the deduction limit for that year, whether or
not you live in the same home during that year.

THEN figure the depreciation
allowed on these
expenditures by multiplying
the business part of their
cost or other basis by...

Line 41
Figure the amount of operating expenses you can carry
over to 2006 by subtracting line 25 from line 24. If the
result is zero or less, you have no amount to carry over.

the percentage in the line 39
instructions for the month
placed in service*.

Line 42
Figure the amount of excess casualty losses and
depreciation you can carry over to 2006 by subtracting
line 31 from line 30. If the result is zero or less, you have
no amount to carry over.

after May 12, 1993, and before 2.564%*.
2005 (except as noted below)
after May 12, 1993, and before the percentage given in
1994, and you either started
Pub. 946.
construction or had a binding
contract to buy or build that
home before May 13, 1993
after May 12, 1993, and you
stopped using your home for
business before the end of the
year

Paperwork Reduction Act Notice. We ask for the
information on this form to carry out the Internal Revenue
laws of the United States. You are required to give us the
information. We need it to ensure that you are complying
with these laws and to allow us to figure and collect the
right amount of tax.
You are not required to provide the information
requested on a form that is subject to the Paperwork
Reduction Act unless the form displays a valid OMB
control number. Books or records relating to a form or its
instructions must be retained as long as their contents
may become material in the administration of any Internal
Revenue law. Generally, tax returns and return
information are confidential, as required by section 6103.
The average time and expenses required to complete
and file this form will vary depending on individual
circumstances. For the estimated averages, see the
instructions for your income tax return.
If you have suggestions for making this form simpler,
we would be happy to hear from you. See the instructions
for your income tax return.

the percentage given in
Pub. 946 as adjusted by the
instructions under Sale or
Other Disposition Before the
Recovery Period Ends in that
publication.

after 1986 and before May 13, the percentage given in
1993,
Pub. 946.
before 1987

the percentage given in
Pub. 534.

*See the Exception on page 3.

Attach a schedule showing your computation and
include the amount you figured in the total for line 40.
Enter “See attached” below the entry space.
Complete and attach Form 4562, Depreciation and
Amortization, only if:
• You first used your home for business in 2005, or
• You are depreciating additions and improvements
placed in service in 2005.
If you first used your home for business in 2005, enter
the amounts from Form 8829, lines 38 and 40, in

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