Friday, July 5, 2013

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.   

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