Where To Deduct Deduct expenses for the business use of your home on Form 1040.Where you deduct these expenses on Form 1040 depends on whether youare: A self-employed person, or An employee. Self-Employed Persons If you are self-employed and file Schedule C (Form 1040), attachForm 8829 to your return. If you file Schedule F (Form 1040), reportyour entire deduction for business use of the home, up to the limitdiscussed earlier (line 32 if you used the worksheet) on line 34 ofSchedule F. Write "Business Use of Home" on the dotted linebeside the entry. Deductible mortgage interest.If you file Schedule C (Form 1040), enter all your deductiblemortgage interest on line 10 of Form 8829. After you have figured thebusiness part of the mortgage interest on lines 12 and 13, subtractthat amount from the total mortgage interest on line 10. The remainderis deductible on Schedule A (Form 1040), lines 10 and 11. Do notdeduct any of the business part on Schedule A. If the interest youdeduct on Schedule A for your home mortgage is limited, enter theexcess on line 16 of Form 8829. If you file Schedule F (Form 1040), include the business part ofyour deductible home mortgage interest with your total business use ofthe home expenses on line 34. You can use the worksheet near the backof this publication to figure the deductible part of mortgageinterest. Enter the nonbusiness part of the deductible mortgageinterest on Schedule A, lines 10 and 11. To determine if the limits on qualified home mortgage interestapply to you, see the instructions for Schedule A or Publication 936. Real estate taxes.If you file Schedule C (Form 1040), enter all your deductible realestate taxes on line 11 of Form 8829. After you have figured thebusiness part of your taxes on lines 12 and 13, subtract that amountfrom your total real estate taxes on line 11. The remainder isdeductible on Schedule A, line 6. Do not deduct any of the businesspart of real estate taxes on Schedule A. If you file Schedule F (Form 1040), include the business part ofreal estate taxes with your total business use of the home expenses online 34. Enter the nonbusiness part of your real estate taxes on line6 of Schedule A. Casualty losses.If you are using Form 8829, refer to the specific instructions forlines 9 and 27 and enter the amount from line 33 on line 27 of Form4684, Section B. Write "See Form 8829" above line 27. If you file Schedule F (Form 1040), enter the business part ofcasualty losses (line 31 if you use the worksheet) on line 27 of Form4684, Section B. Write "See attached statement" above line 27. Other expenses.Report the other home expenses that would not be allowable if youdid not use your home for business (insurance, maintenance, utilities,depreciation, etc.), on the appropriate lines of your Form 8829. Ifyou rent rather than own your home, include the rent you paid on line20. If any of these expenses exceed the deduction limit, carry themover to next year. They will be subject to next year's deductionlimit. If you file Schedule F (Form 1040), include your other homeexpenses that would not be allowable if you did not use your home forbusiness (insurance, maintenance, utilities, depreciation, etc.), withyour total business use of the home expenses on line 34 of Schedule F.If any of these expenses exceed the deduction limit, carry them overto the next year. They will be subject to next years deduction limit. Business expenses not for the use of your home.Deduct in full your business expenses that are not for the use ofyour home itself (dues, salaries, supplies, certain telephoneexpenses, etc.) on the appropriate lines of Schedule C (Form 1040) orSchedule F (Form 1040). Because these expenses are not for the use ofyour home, they are not subject to the deduction limit for businessuse of the home expenses. Employees As an employee, you must itemize deductions on Schedule A (Form1040) to claim expenses for the business use of your home and anyother employee business expenses. This generally applies to allemployees, including outside salespersons. If you are a statutoryemployee, use Schedule C (Form 1040) to claim the expenses. Follow theinstructions given earlier under Self-Employed Persons. The"statutory employee" box within box 15 on your Form W-2 will bechecked if you are a statutory employee. If you have employee expenses for which you were not reimbursed,report them on line 20 of Schedule A. You generally must also completeForm 2106 if either of the following apply. You claim any travel, transportation, meal, or entertainmentexpenses. Your employer paid you for any of your job expensesreportable on line 20. (Amounts your employer included in box 1 ofyour Form W-2 are not considered paid by your employer). However, you can use a simpler form, Form 2106-EZ, instead of Form2106, if you meet the following requirements. You were not reimbursed for your expenses by your employer,or if you were reimbursed, the reimbursement was included in box 1 ofyour Form W-2. If you claim car expenses, you use the standard mileagerate. When your employer pays for your expenses using a reimbursement orallowance arrangement, the payments generally should not be on yourForm W-2 if the following rules for an accountable plan are met. You adequately account to your employer for the expenseswithin a reasonable time. You return any payments not spent for business expenses(excess reimbursements). You must have paid or incurred deductible expenses whileperforming services as an employee. If you meet the accountable plan rules and your business expensesequal your reimbursement, do not report the reimbursement as incomeand do not deduct the expenses. Accounting to employer.You account to your employer when you give your employerdocumentary evidence of your travel, mileage, and other employeebusiness expenses, such as receipts, along with an account book,diary, or similar record in which you entered each expense at or nearthe time you had it. You also may be treated as accounting to youremployer if your employer gives you a per diem or car allowance thatis similar in form to and not more than the federal rate and youverify the time, place, and business purpose of each expense. For moreinformation, see the instructions for Form 2106 and Publication 463,Travel, Entertainment, Gift, and Car Expenses. Deductible mortgage interest.Although you generally can deduct expenses for the business use ofyour home on line 20 of Schedule A (Form 1040), do not include anydeductible home mortgage interest on that line. Instead, deduct boththe business and nonbusiness parts of this interest on line 10 or 11of Schedule A. If the home mortgage interest you can deduct on lines 10 or 11 islimited by the home mortgage interest rules, you cannot deduct theexcess as an employee business expense on line 20 of Schedule A, eventhough you use part of your home for business. To determine if thelimits on home mortgage interest apply to you, see the instructionsfor Schedule A or Publication 936. Real estate taxes.Deduct both the business and nonbusiness parts of your real estatetaxes on line 6 of Schedule A. For more information on amountsallowable as a deduction for real estate taxes, see Publication 530,Tax Information for First-Time Homeowners. Casualty losses.Enter the business part of casualty losses (line 31 of theworksheet) on line 27 of Form 4684, Section B. Write "See attachedstatement" above line 27. Other expenses.If you file Form 2106 or Form 2106-EZ, report on line 4 thefollowing expenses. The business part of your otherwise nondeductible expenses(utilities, maintenance, insurance, depreciation, etc.) that do notexceed the deduction limit. The employee business expenses not related to the use ofyour home, such as advertising. Add these to your other employee business expenses and completethe rest of the form. Enter the total from Form 2106, or Form 2106-EZon line 20 of Schedule A, where it is subject to the2%-of-adjusted-gross-income limit. If you do not have to file Form2106 or Form 2106-EZ, enter your total expenses directly on line 20 ofSchedule A. Example.You are an employee who works at home for the convenience of youremployer. You meet all the requirements to deduct expenses for thebusiness use of your home. Your employer does not reimburse you forany of your business expenses and you are not otherwise required tofile Form 2106 or Form 2106-EZ. As an employee, you do not have gross receipts, cost of goods sold,etc. You begin with gross income from the business use of your home,which you determine to be $6,000. The percentage of expenses due to the business use of your home is20%. You have the following expenses. Deductible mortgage interest (20%) $1,500 Real estate taxes (20%) 1,000 Total     $2,500 Expenses not related to business use of thehome:  Supplies $500  Advertising 1,300  Telephone 200 Total     $2,000 Otherwise nondeductible expenses:  Maintenance (20%) $200  Utilities (20%) 350  Insurance (20%) 250 Total       $800 Depreciation (20%) $1,600 Based on the above expenses, you figure your deduction limit asfollows. Gross income $6,000 Less:  Deductible mortgage interest(20%) $1,500  Real estate taxes (20%) 1,000  Expenses not related to business use of thehome 2,000 4,500 Deduction limit $1,500 Your deduction for otherwise nondeductible expenses anddepreciation is limited to $1,500. You can deduct all of yourotherwise nondeductible expenses ($800) and $700 ($1,500 - $800)of your depreciation. You deduct your expenses for business use of your home on ScheduleA (Form 1040) as shown in the following table. Expense Amount Schedule A Deductible mortgage interest $1,500 Lines10 or 11* Real estate taxes $1,000 Line 6* Expenses not related to the business use of the home $2,000 Line 20** Otherwise nondeductible expenses $800 Line 20** Depreciation $700 Line 20** *In addition to the 80% nonbusiness part of theexpense. **Subject to the 2%-of-adjusted-gross-incomelimit. You can carry over the $900 of depreciation that exceeds thededuction limit to next year, subject to the deduction limit for thatyear.