A simplified home office deduction option for 2013
The Internal Revenue Service announced a simplified option that many owners of home-based businesses and some home-based workers may use to figure their 2013 deductions for the business use of their homes.
In tax year 2010 approximately 3.4 million taxpayers claimed deductions for business use of a home also known as the home office deduction.
The new optional deduction, which is capped at $1,500 per year based on $5 a square foot for up to 300 square feet, will reduce the paperwork and recordkeeping burden on small businesses by an estimated 1.6 million hours annually.
The new option provides eligible taxpayers an easier path to claiming the home office deduction. Currently, they are generally required to fill out a 43-line form, Form 8829, often with complex calculations of allocated expenses, depreciation and carryovers of unused deductions. Taxpayers claiming the optional deduction will complete a significantly simplified form.
Though homeowners using the new option cannot depreciate the portion of their home used in a trade or business, they can claim allowable mortgage interest, real estate taxes and casualty losses on the home as itemized deductions on Schedule A. These deductions need not be allocated between personal and business use, as is required under the regular method.
Business expenses unrelated to the home, such as advertising, supplies and wages paid to employees are still fully deductible.
Current restrictions on the home office deduction, such as the requirement that a home office must be used regularly and exclusively for business and the limit tied to the income derived from the particular business, still apply under the new option.
Comment
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Comment by Billie Crooks on January 19, 2013 at 7:47am -
Great information Kelly and useful. I had doubts about even tackling the task and gathering the needed info for the previous form, this is a great alternative.
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Comment by Misty L. Piekaar on January 18, 2013 at 9:48am
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Kelly- Useful information for those of us who see clients in our home or who work in a home office. Glad to know the process is being stream-lined.
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