Home Office Deduction Simplification

Posted on 01.16.13

The IRS has announced (IR-2013-5) a simplified option that many owners of home-based businesses and some home-based workers may use to figure their deductions for the business use of their homes.

Safe Harbor Home Office Deduction

The new optional deduction described in simultaneously released guidance (Rev. Proc. 2013-13) is capped at $1,500 a year, or $5 per square foot for up to 300 square feet. The optional deduction will reduce the paperwork and record-keeping burden on small businesses by an estimated 1.6 million hours a year, the IRS said. Taxpayers claiming the optional deduction will complete a form that is significantly simpler than the form currently required to claim a home office deduction.

Homeowners using the optional deduction can't 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 on the home as itemized deductions. Business expenses unrelated to the home are still fully deductible. Current restrictions on the home office deduction still apply under the new optional deduction.

The Safe Harbor is effective for tax years beginning after December 31, 2012.

Source: IRS News Release http://www.irs.gov/uac/Newsroom/Simplified-Option-for-Claiming-Home-Office-Deduction-Starting-This-Year