New Home Office Deduction

The number of people working from home has increased, yet claiming the home office deduction has been a burden and filled with many rules in order to qualify.  However, for 2013, the IRS has implemented new home office rules to make it SIMPLE!  Taxpayers can choose between the regular method and the new simplified method.

For the regular method, you must use a portion of your home regularly and exclusively as a principal place of business, as a place to meet with clients or in connection with your trade or business.  As an employee, to claim the deduction, your employer must require that you maintain a home office for his/her convenience and you meet the regular and exclusive use requirement.

On the other hand, you may elect to use the new simplified method.  One of the benefits is that rather than keeping receipts and calculating the actual expenses, you can use the IRS standard of $5 per square foot to determine your home office deduction up to 300 square feet or a total of $1500 deduction.

A few other benefits to this new method:

1. The regular method takes away from your mortgage interest and property taxes if you are a homeowner.  In the new method, you can deduct these in full on your Schedule A.
2. Under the regular method, you may need to pay taxes when you later sell your home where depreciation was taken on as part of the home office deduction.  With the simplified method, you would not need to pay taxes on any recaptured depreciation because technically, you didn’t take depreciation in the first place.
3. Another benefit is that you can change methods from year to year, taking the best option for you.

Believe it or not, the home office deduction is one of the most commonly missed tax breaks for business owners as well as employees.  Now that the IRS has officially made it easier and more beneficial, be sure to take advantage of these write-offs to keep more of your bottom line.

If you have any questions about the new changes to the home office deduction, be sure to call our office and we would be happy to help