The Internal Revenue Service (IRS) has introduced a simplified way for small business owners and home-based employees to claim the home office tax deduction beginning with their 2013 tax returns. Under Revenue Procedure 2013-13, small business owners who maintain a home office and employees who work from home will be able to deduct up to $1,500 per year using a new, simplified version of the required form.
Taxpayers may deduct $5 per square foot of home office space, up to 300 feet, for as much as $1,500 in deductions. Current restrictions on claiming the home office deduction, such as the requirement that a home office be used regularly and exclusively for business purposes and the limit on the amount of the deduction to income derived from the particular business, still apply. The new option is an alternative to the calculation, allocation, and substantiation of actual expenses previously required. Instead of the 43-line Form 8829, which requires complex calculations of allocated expenses, depreciation, and carryovers of unused deductions, taxpayers can claim the deduction through a simplified form.
Homeowners using the new options cannot depreciate the portion of their home used in a trade or business, but they can claim allowable mortgage interest, real estate taxes, and casualty losses as itemized deductions on Schedule A. These deductions do not need to be allocated between personal and business use. Business expenses unrelated to the home, such as advertising, supplies, and wages paid to employees, are still fully deductible.
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