To be able to write off part of your home as a business expense you have to use that part regularly and exclusively for your arts or crafts business. For example, making or storing inventory for your products, or meeting with clients. It also includes that part of your home where you perform all your administrative tasks such as doing your bookwork or calling clients and vendors. Here is how to fill out Form 8829, Part 1:
Part of Your Home Used to Store Inventory
On Line 1 record the square footage of your home that you use regularly and exclusively to store your arts and crafts inventory, make your arts and crafts and handle your arts and crafts business related tasks such as ordering merchandise and handling customer orders. You can only deduct this portion of your home if your home is the only fixed location for your arts and crafts business. If you are unsure what this means, check out my article about using home office expenses prudently.
Total Square Footage and Business Percentage
On Line 2 enter the total livable square footage of your home. For example, you use 200 square feet of your home regularly and exclusive for your arts and crafts business. Your home's total square footage is 2,000. Your business use percentage that you enter on line 3 and line 7 is 10% (200/2,000).
I often am asked if there is a 'magic' or 'standard' business use percentage. The answer is no. Don't fudge your numbers; figure this percentage honestly using actual square footage figures. If you're not sure what they are, your property tax appraiser's office will have the total livable square footage on their website as they use this figure for your property tax invoice. If you rent, get the figure from your landlord.
