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CAUTION

If you enter a loss on line 31, you may have an excess business loss. Use Form 461 to figure your excess business loss.

Reporting your expenses for business use of the home. If you didn’t use the simplified method, include the amount from line 36 of Form 8829 on line 30 of the Schedule C you are filing for that business.

If you used the simplified method. If you elect to use the simplified method for the business use of a home, complete the additional entry spaces on line 30 for that home only. Include the amount from line 5 of the Simplified Method Worksheet on line 30.

If you itemize your deductions on Schedule A (Form 1040), you may deduct your mortgage interest, real estate taxes, and casualty losses on Schedule A (Form 1040) as if you didn’t use your home for business. You can’t deduct any excess mortgage interest, excess real estate taxes, or excess casualty losses on Schedule C for this home.

Use Part II of Schedule C to deduct business expenses that are unrelated to the qualified business use of the home (for example, expenses for advertising, wages, or supplies, or depreciation of equipment or furniture).

Deduction figured on multiple forms. If you used more than one home for a business during the year, use a Form 8829 for each home or use the simplified method for one home and Form 8829 for any other home. Combine the amount you figured using the simplified method and the amounts you figured on your Forms 8829, and then enter the total on line 30 of the Schedule C for that business.

Line 31

Figuring your net profit or loss. If your expenses (including the expenses you report on line 30) are more than your gross income, don’t enter your loss on line 31 until you have applied the at-risk rules and the passive activity loss rules. To apply these rules, follow the instructions under Line 32 , later, and the Instructions for Form 8582. After applying those rules, the amount on line 31 will be your loss, and it may be smaller than the amount you figured by subtracting line 30 from line 29.

If your gross income is more than your expenses (including the expenses you report on line 30) and you don’t have prior year unallowed passive activity losses, subtract line 30 from line 29. The result is your net profit.

If your gross income is more than your expenses (including the expenses you report on line 30) and you have prior year unallowed passive activity losses, don’t enter your net profit on line 31 until you have figured the amount of prior year unallowed passive activity losses you may claim this year for this activity. Use Form 8582 to figure the amount of prior year unallowed passive activity losses you may include on line 31. Be sure to indicate that you are including prior year passive activity losses by entering “PAL” to the left of the entry space.

If you checked the “No” box on line G, see the Instructions for Form 8582. You may need to include information from this schedule on Form 8582 even if you have a net profit.

Rental real estate activity. Unless you are a qualifying real estate professional, a rental real estate activity is a passive activity even if you materially participated in the activity. If you have a loss, you may need to file Form 8582 to apply a limitation that may reduce your loss. See the Instructions for Form 8582.

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TIP

You can deduct one-half of your self-employment tax on Schedule 1 (Form 1040), line 15. See the Instructions for Schedule SE (Form 1040) for details.

Community income. If you and your spouse had community income and are filing separate returns, see the Instructions for Schedule SE (Form 1040) before figuring self-employment tax.

Earned income credit (EIC). If you have a net profit on line 31, this amount is earned income and may qualify you for the EIC.

To figure your EIC, use the Instructions for Form 1040,