IRS Simplifies the Home Office Tax Deduction

by | Sep 27, 2018 | Best Business Helps | 0 comments

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Last Updated: Mar 3, 2017
The IRS is making it easier for home businesses to take the home office deduction. An optional new method for computing the deduction will save taxpayers time and effort. 

Taking the home office tax deduction has just become easier for individuals whose home is their primary place of business. That’s because the IRS has just announced a simplified option homebased workers can use to determine their deductions for the business use of their home.

The new optional tax deduction, which goes into effect for the 2013 tax year (the return that gets filed by April, 2014) allows home businesses to deduct $5 per square foot for their home office up to a maximum of 300 square feet ($1500). The option provides taxpayers with easier way to calculate and claim the home office deduction than completing the current a 43-line form (Form 8829.)

Homeowners using the new option cannot depreciate the portion of their home used in a trade or business, however, 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.

Business expenses unrelated to the home, such as advertising, supplies and wages paid to employees are still fully deductible.

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. 

The new simplified option is available starting with the 2013 return most taxpayers file early in 2014. Further details on the new option can be found in Revenue Procedure 2013-13.

About the author:
Janet Attard is the founder of the award-winning  Business Know-How small business web site and information resource. Janet is also the author of The Home Office And Small Business Answer Book and of Business Know-How: An Operational Guide For Home-Based and Micro-Sized Businesses with Limited Budgets.  Follow Janet on Twitter and on LinkedIn

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