Think claiming the home office deduction on your federal tax return is too complicated? The IRS agrees.
If you’re able to answer “yes” to a series of questions, you can claim a standard deduction of up to $1,500 per year based on $5 a square foot for up to 300 square feet.
The IRS plans to first offer the new option for your 2013 return (that’s the one you file early in 2014), though the new form isn’t ready yet. In fact, the IRS is accepting comments — ironically through April 15, 2013 — on the new option.
So what’s the catch? You can’t depreciate the portion of your home you use for your business.
But you still can claim allowable mortgage interest, real estate taxes, and casualty losses on the home as itemized deductions on Schedule A. And you don’t have to split those deductions based on how much of your house you use for business and how much is personal space.
Business expenses unrelated to the home, such as advertising, supplies, and wages paid to employees are still fully deductible.
You’ll also need to determine if the simplified deduction will mean less tax savings for you and is worth the reprieve from completing IRS Form 8829.
Whichever form you ultimately decide to use, you have to meet the other standards for deducting home office costs:
- You must use your home office regularly and exclusively for business. A family room where you do some paperwork doesn’t count.
- It must be your primary place of business.
- If you’re an employee required to work from home, you must not charge your employer rent.
You’ll find more details on the new home deduction option in Revenue Procedure 2013-13. To submit comments about it:
- E-mail to: Notice.Comments@irscounsel.treas.gov. Include “Rev. Proc. 2013-13” in the subject line.
- Snail mail to: Internal Revenue Service, CC:PA:LPD:PR (Rev. Proc. 2013-13), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.