Home Office Deduction – Simplified Option

Starting in tax year 2013, the IRS offers a new simplified way of claiming a tax deduction for the business use of a home office.   The new optional method allows taxpayers to claim a standard deduction of $5 per square foot of their home used for business.  The maximum allowed size that can be claimed is 300 square feet, which translates into a $1500 deduction.

Some of the advantages of using this option are that you no longer have to split deductions such as mortgage interest and real estate taxes between Schedules A and C (or F).  Also, there is no depreciation deduction to claim and no depreciation recapture when you sell your home.

The criteria for claiming a home office deduction is unchanged.  My earlier article, Home Office Deduction, discusses the criteria in more detail.

The new simplified option may not be more beneficial to everyone. For a more detailed discussion of this option see the IRS article Simplified Option for Home Office Deduction and Revenue Procedure 2013-13.   

Brycast Financial Planning in Austin Texas --- We Can Help
Income Tax Preparation in Austin Texas

contact: service@brycast.com http://www.brycast.com/ (512) 293-4170

Enrolled Agent; Investment Advisor Representative

The Cost Basis and Holding Period of Inherited Property

If you inherited property and are planning on selling it, you may be wondering how to treat the gain or loss. First, the basis of the property is its fair market value at the time of the decedant's death. This is usually referred to as "step-to fair market value". So, you don't have to worry about what the decendant paid for the property, just what is was worth when they died.

You can see that this is probably beneficial because many things, such as real estate, appreciate with time. Plus, it might be really difficult to determine the original cost because the property could have been purchased many years (decades) ago.

The holding period of the inherited property is characterized as long-term, regardless of when the decedant purchased it. This is another break because of the low long-term capital gains rate compared to the short term cap rate.

There are exceptions for the step-to FMV treatment.  For example, IRAs and 401(k)s.

Brycast Financial Planning in Austin Texas --- We Can Help
Income Tax Preparation in Austin Texas

contact:(512) 293-4170)  service@brycast.com http://www.brycast.com/

Enrolled Agent; Investment Advisor Representative