The IRS is Offering a Simpler Deduction for Home Offices

Matt Shelly
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Home-based workers may find that completing their taxes just got a little bit easier. Starting with the 2013 tax year, the Internal Revenue Service has simplified home office deduction calculations. This simplified process makes it easier to determine your deduction, which may help many home-based workers to take advantage of the deduction who might not have done so in past years for fear of being audited.

The most important change the IRS has made with regard to the home office deduction is the way in which it is calculated, which is called the safe harbor method. In prior years, taxpayers were forced to track and document all actual expenses related to home business space. The complexities of the old method prohibited many taxpayers from taking this tax deduction because they were afraid of miscalculating and triggering an audit.

Using the safe harbor method, you simply calculate the space dedicated to your home office, cap the number at 300 square feet, and then multiply it by $5 per square foot. This formula-based calculation makes the home office deduction almost foolproof. Filers can still opt to use the old method, but they will be held accountable for the calculation and documentation of actual expenses.

Another change to the home office deduction include where the deductions are actually listed. Taxpayers who claim this tax deduction using the older method are required to complete Form 8829, which, at forty-three lines, can be fairly complicated to fill out. If you choose the new simplified home office deduction method, you'll have a much simpler and more streamlined form to deal with. Using the new option, filers can claim the amount allowable on expenses such as real estate taxes and mortgage interest on Schedule A, and you do not need to allocate them between business and personal use. 

Note that these new rules do not change the criteria for who qualifies to take a home office deduction. To qualify, you must have a portion of your home that you use to carry out business regularly, and that space must be used exclusively for business. In other words, sitting at the kitchen table while you work on your laptop does not qualify you for the home office deduction.

If you're self-employed and have a home office, or if you are an employee of a company that requires you to maintain office space in your home, there's a good chance that you qualify for this home office deduction. Now that the method of calculating it has become much simpler, you may find that you save quite a bit more on taxes by taking advantage of this deduction, even if you haven't in the past.


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