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If you view the worksheet supporting Line 4 Business use of your home of IRS Form 2106 Employee Business Expenses, you will see that the direct portion of Mortgage Interest, Mortgage Insurance, and Real Estate Taxes flows to Line 4 of Form 2106, but the indirect portion does not. The indirect portion is on Lines 6, 10, and 13 of the federal Schedule A where it is not subject to the 2% limit it would be subject to on Line 21 of the Schedule A.

This is consistent with the instructions in IRS Publication 587 Business Use of Your Home, page 20: 
 
Home mortgage interest. If you file Schedule C (Form 1040), enter all your deductible mortgage interest on line 10 of Form 8829 (without distinguishing between personal and business use). Deductible mortgage interest is the total interest you can deduct after applying certain limits on qualified home mortgage interest. (In other words, it is the same amount of home mortgage interest you would have been allowed to deduct using Schedule A (Form 1040) if you treated the business use of your home as personal use and you itemized your deductions.) The business part of the deductible mortgage interest will be included on line 14 of Form 8829, and is generally equal to the deductible mortgage interest multiplied by the business percentage (line 7 of Form 8829).

If you itemize your deductions, only include the personal part of your deductible mortgage interest on Schedule A (Form 1040), lines 10 or 11. To figure the personal part of the deductible mortgage interest to include on Schedule A, reduce all of your deductible mortgage interest by the business part you included on line 14 of Form 8829.

If your deductible mortgage interest is less than your total mortgage interest because of the limits on qualified home mortgage interest, you can also deduct the business part of the excess. Multiply the mortgage interest you can't deduct due to these limits by the business percentage and enter the result on line 16 of Form 8829.

If you file Schedule F (Form 1040), include the business part of your deductible and excess home mortgage interest with your total business-use-of-the-home expenses on line 32 of Schedule F (Form 1040). Enter “Business Use of Home” on the dotted line beside the entry. You can use the Worksheet To Figure the Deduction for Business Use of Your Home, later in this publication, to figure the business part of your mortgage interest. Enter the nonbusiness part of the deductible mortgage interest on Schedule A (Form 1040), line 10 or 11.

To determine if the limits on qualified home mortgage interest apply to you, see the instructions for Schedule A (Form 1040) or Pub. 936.

Mortgage insurance premiums. If you file Schedule C (Form 1040), enter all your deductible mortgage insurance premiums on line 10 of Form 8829 (without distinguishing between personal and business use). Deductible mortgage insurance premiums are the total premiums you can deduct after applying a limit based on your adjusted gross income. When you figure your adjusted gross in-come for this purpose, exclude the gross income from the business and the deductions attributable to that income. (In other words, it is the same amount of qualified mort-gage insurance premiums you would have been allowed to deduct using Schedule A (Form 1040) if you did not conduct a business from your home and you itemized your deductions.) The business part of the deductible mortgage insurance premiums will be included on line 14 of Form 8829, and is generally equal to the deductible mortgage insurance premiums multiplied by the business percentage (line 7 of Form 8829).

If you itemize your deductions, only include the personal part of your deductible mortgage insurance premiums on Schedule A (Form 1040), line 13. To figure the personal part of the deductible mortgage insurance premiums to include on Schedule A, reduce all of your deductible mortgage insurance premiums by the business part you included on line 14 of Form 8829.

If your deductible mortgage insurance premiums are less than your total mortgage insurance premiums because of the limit based on your adjusted gross income, you can also deduct the business part of the excess. Multiply the mortgage insurance premiums you can't deduct due to this limit by the business percentage and enter the result on line 16 of Form 8829.

If you file Schedule F (Form 1040), include the business part of your deductible and excess qualified mortgage insurance premiums with your total business-use-of-the-home expenses on line 32 of Schedule F (Form 1040). Enter “Business Use of Home” on the dotted line beside the entry. You can use the Worksheet To Figure the Deduction for Business Use of Your Home, later in this publication, to figure the business part of your qualified mortgage insurance premiums. Enter the nonbusiness part of the qualified mortgage insurance premiums on Schedule A (Form 1040), line 13.

To determine if the limits on qualified mortgage insurance premiums apply to you, see the instructions for Schedule A (Form 1040) or Pub. 936.
 
Real estate taxes. If you file Schedule C (Form 1040), enter all your deductible real estate taxes on Form 8829, line 11 (without distinguishing between personal and business use). The business part of the deductible real estate taxes will be included on line 14 of Form 8829, and is generally equal to the deductible real estate taxes multiplied by the business percentage (line 7 of Form 8829).

If you itemize your deductions, only include the personal part of your deductible real estate taxes on Schedule A (Form 1040), line 6. To figure the personal part of the deductible real estate taxes to include on Schedule A, reduce all of your deductible real estate taxes by the business part you included on line 14 of Form 8829.

If you file Schedule F (Form 1040), include the business part of real estate taxes with your total business-use-of-the-home expenses on line 32 of Schedule F (Form 1040). Enter “Business Use of Home” on the dotted line beside the entry. Enter the nonbusiness part of your
real estate taxes on Schedule A (Form 1040), line 6.


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