Form 8829 2026 Draft: Line 11 Worksheet, PMI and What Changed

The Line 11 Worksheet, line 16 and the excess real estate taxes are the parts of Form 8829 that trip people up, and in 2026 those are the lines the IRS touched. The form itself barely moved. Comparing the 2025 final with the 2026 draft line by line, the only differences are a semicolon in line 26, the Part IV heading (now “Carryover of Unallowed Expenses to 2027”) and the footer. The instructions are another matter, and the changes there will move real numbers on some returns.

Everything below comes from the draft form (footer “Created 4/15/26”) and the draft instructions dated July 24, 2026. Drafts can still change before the IRS posts final versions, so check irs.gov/Form8829 before you file.

What changed for 2026

The instructions’ What’s New section lists these items for the form, plus a permanent personal casualty loss deduction that now covers qualified state declared disasters:

• Mortgage insurance premiums are treated as mortgage interest, reported on lines 10 and 16.
• The state and local tax limit rises to $40,400 ($20,200 if married filing separately), and falls toward a floor of $10,000 ($5,000 if married filing separately) once modified adjusted gross income passes $505,000 ($252,500).
• A special depreciation allowance for qualified production property (QPP), discussed below.

Smaller edits: an employee’s home office “must be for the convenience of your employer” (employees still cannot use the form), and the clergy and military housing paragraph now lists mortgage insurance premiums. The line 41 depreciation percentages are unchanged. For the self-employment form this one feeds, see our guide to the 2026 Schedule C.

Lines 10 and 16: mortgage insurance premiums

The 2025 instructions never mention mortgage insurance. The 2026 draft devotes a block to it, with the same logic as mortgage interest.

If you itemize. The draft gives a two-step process for line 10. Step 1 is to treat all premiums you paid under a mortgage insurance contract issued after December 31, 2006, in connection with home acquisition debt secured by your first or second home, as a personal expense, and complete a separate Mortgage Insurance Premiums Deduction Worksheet from the Schedule A instructions. When you fill in line 2 of that worksheet, you enter your adjusted gross income “excluding the gross income and deductions attributable to the business use of the home.” Step 2 is to put in column (b) of line 10 the deductible premiums from Step 1 that are attributable to the home where you worked.

If you take the standard deduction. The draft says to report no premiums on line 10. Instead, enter all the home mortgage interest and mortgage insurance premiums paid on loans used to buy, build or substantially improve the home in column (b) of line 16, leaving out anything on a loan that did not benefit the home, such as a home equity loan used to pay off credit cards.

The overflow. The IRS gives a new Example 2: you paid $3,000 of mortgage insurance premiums on loans used to buy, build or substantially improve the home, but the Schedule A worksheet limits what you can put in column (b) of line 10 to $1,000. You include $2,000 ($3,000 minus $1,000) in column (b) of line 16.

Under the statute, the amount treated as interest is reduced by 10 percent for each $1,000 ($500 if married filing separately), or fraction of that amount, by which adjusted gross income exceeds $100,000 ($50,000 if married filing separately). By our arithmetic, a joint filer with AGI of $109,001 has lost all of it on Schedule A. Reading Example 2 the way the IRS wrote it, the premiums the phase-out keeps off line 10 are not lost to the business side: they go into column (b) of line 16, where, like every column (b) expense, only the line 7 business percentage counts (line 24). The personal share stays lost. How much of the line 16 amount you can use depends on your business income, because it sits among the expenses limited by lines 15 and 27. As a Schedule C expense it should also lower the base for self-employment tax; that is our inference, not something the instructions say.

Not retroactive

The draft says the premiums are treated as mortgage interest “for tax years after 2017.” That suggests premiums from 2022 through 2025 become deductible. They do not. “After 2017” comes from section 163(h)(3)(F), “Special rules for taxable years beginning after 2017,” the existing Code subparagraph into which Public Law 119-21 inserted the mortgage insurance rule. It is not the effective date. Public Law 119-21 section 70108(b) says the amendments “shall apply to taxable years beginning after December 31, 2025,” and the old clause ended the deduction for amounts paid or accrued after December 31, 2021. For the personal-side rules, see our guide to Form 1098 box 5 and the mortgage insurance deduction.

The Line 11 Worksheet for 2026

Line 11 is real estate taxes on the home. The business share of those taxes stays off Schedule A line 5b, but line 11 can only take the part that fits under the state and local tax limit after your personal state and local taxes. The instructions send you to a worksheet to find that room.

Step 1 is a shortcut. If your state and local income (or general sales) taxes, real estate taxes and personal property taxes total no more than $10,000 ($5,000 if married filing separately), enter all the real estate taxes attributable to the home in column (b) of line 11 and skip the worksheet. Notice that $10,000 is the floor of the cap, not the 2026 cap itself.

Otherwise, the worksheet runs like this. Line 5 is your total state and local taxes. Line 6 is the real estate taxes multiplied by the business percentage from line 7 of Form 8829. Line 7a subtracts line 6 from line 5. Then three yes-or-no questions pick line 8:

• 7b asks whether line 5 is $10,000 or less ($5,000 if married filing separately). If so, line 8 is $10,000 ($5,000).
• 7c asks whether line 7a is “greater than or equal to $40,400 ($20,200 if married filing separately).” If so, line 8 is again $10,000 ($5,000).
• 7d asks whether your modified adjusted gross income, using the Schedule A state and local tax worksheet and assuming $40,400 on line 8, would be $505,000 ($252,500 if married filing separately) or less. “Yes” puts $40,400 ($20,200) on line 8. “No or Unsure” sends you to the iteration instructions.

The 2025 version has the same boxes with $40,000 ($20,000) and $500,000 ($250,000). Its 7d already offered “No or Unsure”; the only wording fix is in the iteration instructions, which in 2025 applied if you answered “No” to line 7d and now say “No or Unsure.”

Line 9 is line 8 minus line 7a, not below zero. Line 10 is the smaller of line 6 and line 9; it goes on line 11 of Form 8829, column (a). Line 11 of the worksheet, line 6 minus line 10, is the excess real estate taxes, which go on line 17, column (a).

A worked example

Take a married couple filing jointly who itemize, with $30,000 of state income tax, $12,000 of real estate tax on the home, a 15 percent business-use percentage on line 7 and modified AGI of $250,000. This script follows the worksheet:

def line11_worksheet(income_tax, real_estate, biz_pct, cap, floor=10_000):
    line5 = income_tax + real_estate
    line6 = real_estate * biz_pct
    line7a = line5 - line6
    if line5 <= floor or line7a >= cap:
        line8 = floor
    else:
        line8 = cap          # 7d answered "Yes": MAGI at or below the threshold
    line9 = max(line8 - line7a, 0)
    line10 = min(line6, line9)   # Form 8829, line 11, column (a)
    line11 = line6 - line10      # Form 8829, line 17, column (a)
    return line5, line6, line7a, line8, line9, line10, line11

print(line11_worksheet(30_000, 12_000, 0.15, cap=40_400))
# (42000, 1800.0, 40200.0, 40400, 200.0, 200.0, 1600.0)
print(line11_worksheet(30_000, 12_000, 0.15, cap=40_000))
# (42000, 1800.0, 40200.0, 10000, 0, 0, 1800.0)

Under the 2026 numbers, line 5 is $42,000, so 7b is “No.” Line 6 is $1,800 and line 7a is $40,200, below $40,400, so 7c is “No” too. MAGI is under $505,000, so 7d is “Yes” and line 8 is $40,400. Line 9 is $200, and line 10, the smaller of $1,800 and $200, puts $200 on line 11 of Form 8829. The other $1,600 is excess and goes on line 17. On Schedule A the couple counts $30,000 plus the $10,200 personal share of the property tax; add the $200 and the total is the $40,400 cap.

Under the 2025 rules 7c is “Yes” ($40,200 is above $40,000), line 8 is $10,000 and all $1,800 lands on line 17. The $400 higher cap moved $200 from line 17 to line 11, which matters for the reason below.

Iteration near the threshold

If you answer “No or Unsure” at 7d, the iteration instructions start with $10,000 on worksheet line 8, recompute MAGI and repeat until the change between passes is no more than $1. For how the limit works on the personal side, see our Schedule A 2026 line-by-line guide and the 2027 SALT cap breakdown.

Line 17 and the income limit

Line 11 and line 17 are not equal. Real estate taxes on line 11 are deducted like mortgage interest, ahead of the business income limit. Excess taxes on line 17 are operating expenses: line 27 allows only the smaller of line 15 or line 26, and the rest carries forward through line 43. So the extra $200 on line 11 in the example no longer depends on the business earning enough to absorb it. Filers who take the standard deduction put all the real estate taxes paid on the home in column (b) of line 17. One more edit: for line 9, casualty losses, the draft now accepts a “federally or state declared disaster” where 2025 said only “federally declared.”

Line 41: why QPP doesn’t reach a home office

The instructions open with a What’s New item saying that “you may be able to elect a 100% depreciation allowance” for QPP for business use of the home if you meet certain requirements, and point to Notice 2026-16. Headlines about “100 percent depreciation for home offices” would be wrong.

The requirements in the draft are demanding: the property must be an integral part of a qualified production activity, its original use must begin with you, construction must begin after January 19, 2025, and before January 1, 2029, and it must be placed in service after July 4, 2025, and before January 1, 2031. The draft adds that certain existing property acquired during that window may also qualify if it meets certain requirements. Notice 2026-16, restating section 168(n)(2)(C) in its section 2.02(4), says QPP does not include any portion of nonresidential real property used for “offices, administrative services, lodging, parking, sales activities, research activities, software development or engineering activities, or other functions unrelated to the manufacturing, production, or refining of tangible personal property.” A qualified production activity is the manufacturing, production or refining of a qualified product that results in a substantial transformation of the property comprising it. In our reading, the realistic candidate is new space, built or acquired within those windows, where you actually manufacture or produce a physical product. A desk in a spare bedroom is office use, and offices are excluded.

For nearly everyone else line 41 is unchanged: 2.564 percent for homes first used for business after May 12, 1993 and before 2026, and for first use in 2026 a monthly table running from 2.461 percent in January to 0.107 percent in December.

Coming back from the simplified method

If you used the simplified method in 2025 and switch to Form 8829 for 2026, unallowed expenses from an earlier Form 8829 can carry into the 2026 form. For line 25, the draft says to enter the amount from your 2025 Form 8829, line 43; if you filed a 2024 Form 8829 and used the simplified method for 2025, use line 6a of your 2025 Simplified Method Worksheet (or line 43 of your 2024 form). Line 31 works the same way with line 44 and line 6b.

The simplified method’s numbers are unchanged in the draft Schedule C instructions: $5 per square foot, up to 300 square feet. That works out to a maximum of $1,500, our arithmetic from those two figures. If you use Form 8829, the instructions say to enter the amount from its line 36 on Schedule C, line 30.

Sources

• IRS, Instructions for Form 8829 (2026), draft dated July 24, 2026 — https://www.irs.gov/pub/irs-dft/i8829—dft.pdf
• IRS, Form 8829 (2026), draft created April 15, 2026 — https://www.irs.gov/pub/irs-dft/f8829—dft.pdf
• IRS, Instructions for Form 8829 (2025) — https://www.irs.gov/pub/irs-prior/i8829—2025.pdf
• IRS, Form 8829 (2025) — https://www.irs.gov/pub/irs-prior/f8829—2025.pdf
• IRS, Instructions for Schedule C (2026), draft dated October 8, 2026 — https://www.irs.gov/pub/irs-dft/i1040sc—dft.pdf
• IRS, Notice 2026-16 (qualified production property), section 2.02 — https://www.irs.gov/pub/irs-drop/n-26-16.pdf
• 26 U.S.C. 163(h)(3)(E) and (F), with Public Law 119-21 section 70108(b), Legal Information Institute — https://www.law.cornell.edu/uscode/text/26/163