What this line means
The mortgage interest you paid on your home during the year, reported as an indirect expense. You enter the full amount here, and the form multiplies it by your business-use percentage on line 3 to determine the deductible business portion. The business share reduces your Schedule C profit. The personal share can still be deducted on Schedule A if you itemize. Mortgage interest is in a privileged group of expenses — it is deductible even if your business profit on line 8 is zero.
Does this apply to you?
- You pay mortgage interest on the home where your business office is located
- You own (not rent) the home where you operate your business
- You want to split your mortgage interest between business use (Schedule C) and personal use (Schedule A)
Easy to overlook
The business portion comes off Schedule A If you deduct part of your mortgage interest here on Form 8829, that same portion must be removed from Schedule A (Itemized Deductions). You cannot deduct the same dollars twice. The business portion goes against your Schedule C income (reducing self-employment tax), and only the remaining personal portion stays on Schedule A. The Schedule C deduction is more valuable because it also reduces your self-employment tax. 1 IRS Form 8829 instructions — Line 10
Home equity loan interest counts if proceeds were used for the home Interest on a home equity loan or line of credit is deductible here if the loan was used to buy, build, or substantially improve the home. If you took a home equity loan for personal expenses (vacation, car), that interest does not belong on Form 8829. The loan’s purpose, not just its existence, determines deductibility. 2 IRS Publication 587 — mortgage interest allocation for home office
Watch out for this
Entering the full annual mortgage payment instead of just the interest portion. Your monthly mortgage payment includes principal, interest, property taxes, and possibly insurance. Only the interest is deductible on this line. Check your Form 1098 from your lender — Box 1 shows the interest paid during the year. That is the number for line 10.
Footnotes
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IRS Form 8829 Instructions, Line 10. https://www.irs.gov/instructions/i8829 ↩
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IRS Publication 587, Business Use of Your Home, Deducting Expenses. https://www.irs.gov/pub/irs-pdf/p587.pdf ↩