Law & Order

New Option for Claiming Home Office Deduction

The Internal Revenue Service (IRS) has announced a simplified option for deducting the costs associated with having a home business office. The new optional approach is based on the amount of square feet being used for business purposes by the taxpayer. If it is 300 sq.-ft. or less, the taxpayer can claim a deduction of $5 per square foot (up to $1,500 per year). The existing approach is to fill out Form 8829, which may require complex calculations of allocated expenses, depreciation and carryovers of unused deductions. 

Under the new option, the taxpayer can still claim allowable mortgage interest, real estate taxes and casualty losses on the home as itemized deductions on Schedule A, but they cannot depreciate the portion of the home used for business. These deductions need not be allocated between personal and business use, as is required under the regular method. Current restrictions on the home office deduction, such as the requirement that a home office must be used regularly and exclusively for business, still apply under the new option, which is available starting with the 2013 return (filed in 2014).

For more information, visit the IRS website.