The IRS has recently announced a simplified option that many owners of home-based businesses and some home-based workers may use to figure their deductions for the business use of their homes.
Beginning with returns for 2013, which will be filed in 2014, taxpayers can write-off the home office deduction based on a standard rate of $5 per square foot of space used for business, with a maximum deduction of $1,500.
Under this new method, taxpayers will avoid allocating actual costs and figuring depreciation on Form 8829.
Taxpayers claiming the optional deduction will complete a significantly simplified form. Though homeowners using the new option cannot depreciate the portion of their home used in a trade or business, they can claim allowable mortgage interest, real estate taxes and casualty losses on the home as itemized deductions on Schedule A. These deductions need not be allocated between personal and business use, as is required under the regular method.
Current restrictions on the home office deduction, such as the requirement that a home office must be used regularly and exclusively for business and the limit tied to the income derived from the particular business, still apply under the new option.
At Gedeon Law & CPA, we are available to consult with clients on the tax benefits of claiming the home office deduction under the regular method versus the new simplified method.