The IRS has announced a simplified option for claiming a home office deduction beginning with 2013 returns.
The new optional deduction, capped at $1500 per year based on $5 a square foot for up to 300 square feet, is intended to reduce thepaperwork and recordkeeping burden on small businesses.
Currently claiming a home office deduction requires a fairly complex calculation of allocated expenses, depreciation and carryovers of unused deductions. Homeowners using the new option cannot depreciate the portion of their home used in a trade or business and will claim allowable mortgage interest, real estate taxes and casualy losses on the home as an itemized deduction and will not have to allocate those deductions between personal and business use.
The current requirement that a home office must be used regularly and exclusively for business remains in effect and the allowable deduction will be limited to gross income of the business. Any excess deduction cannot be carried forward.
Taxpayers will be allowed to switch methods annually but once a return is filed the method chosen for that year cannot be reversed.
The new optional deduction, capped at $1500 per year based on $5 a square foot for up to 300 square feet, is intended to reduce thepaperwork and recordkeeping burden on small businesses.
Currently claiming a home office deduction requires a fairly complex calculation of allocated expenses, depreciation and carryovers of unused deductions. Homeowners using the new option cannot depreciate the portion of their home used in a trade or business and will claim allowable mortgage interest, real estate taxes and casualy losses on the home as an itemized deduction and will not have to allocate those deductions between personal and business use.
The current requirement that a home office must be used regularly and exclusively for business remains in effect and the allowable deduction will be limited to gross income of the business. Any excess deduction cannot be carried forward.
Taxpayers will be allowed to switch methods annually but once a return is filed the method chosen for that year cannot be reversed.
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