Home Office Deduction Simplified, beginning with the 2013 tax year, the IRS is making a simpler method available for calculating the home office deduction. At their option, taxpayers may claim a standard rate of $5 per square foot for the qualified business use of their home instead of using a prorated portion of their actual home-related expenses. The maximum square footage that can be considered in the calculation is 300.
Employees who receive advances,allowances, or reimbursements from their employers for their home office expenses may not use the simplified method.
A few details. Taxpayers using the simplified method may separately deduct qualified home mortgage interest and property taxes. Because these expenses must be claimed as itemized deductions, they won\’t reduce business income for purposes of selfemployment tax.
No depreciation and/or Section 179 expensing deductions are available for a home office in years the taxpayer chooses to use the simplified method. However, deductions for other trade or business expenses unrelated to the use of the home for business purposes – advertising, supplies, wages paid, etc. are still deductible.
A good choice? Because the new method does not require taxpayers to keep records of amounts paid for utilities, trash and snow removal, and other \”indirect\” homerelated expenses, it eliminates much of the recordkeeping associated with claiming the home office deduction. However, all of the tax law\’s other strict requirements for the deduction must continue to be met.
Taxpayers interested in maximizing their deductions may want to continue tracking their actual expenses. That way, the deduction can be figured both ways to see which method is most beneficial in their specific circumstances.