I have a single 20 amp basement outlet with a 20 amp breaker and #12 wire with ground. Can I tap into that outlet as a source of power for 8 recessed lights in that room? Can I use #14 wire to the lights from the outlet? Should I power to the light switch first from the outlet? Thanks in advance for any help on this matter.

Can #14 wire be used on a 20 amp home circuit if it is to be used only for lighting in a single room.

The entire circuit needs to be #12 wire for a 20 amp circuit, no shortcuts here.

Powering the light switch from the point closest to the panel is best, due to the load of the recess lights.

I would use #14 wire and replace the 20A breaker with a 15A breaker. That would be more standard for lighting!

I would think that you would be able to find spare 15A breakers already in the panel; if not they are cheap.