IRS Offers Simplified Option for Home-Office Deduction with $1,500 Cap

IIRS Offers Simplified Option for Home-Office Deduction with $1,500 CapA growing number of Americans work out of their home as free-lancers, entrepreneurs and fledgling small-business operators. This means that more money is being spent on products that will allow them to work from home with more ease, from small items like an office chair or desktop computer to larger purchases such as an Enviro garden building that will allow them to have a dedicated space to work in. This increase in home-based businesses has been fueling the popularity of the home-office deduction over recent years.
Those that work from home often convert a portion of a room into a workspace or an entire room into their home office meaning space constraints can often pose an issue for setting up the appropriate furniture. However, it’s good to know that rectangle office desks can save space and are available to purchase online.
The Internal Revenue Service Tuesday announced a simplified option form for many owners of home-based businesses and some home-based workers. Doing taxes can be a handful, and even worse if you find yourself falling back on your taxes. Luckily if you are looking for help, you could use someone similar to this HST Lawyer Toronto or a tax lawyer more local to you for help with your taxes.
The new optional home-office deduction – available starting this tax year for returns filed in 2014 – is capped at $1,500 per year, based on $5 a square foot for up to 300 square feet.
This option will reduce the paperwork and record-keeping burden on small businesses by an estimated 1.6 million hours annually, the IRS said.
In tax year 2010, nearly 3.4 million taxpayers claimed the home office deduction.
“This is a common-sense rule to provide taxpayers an easier way to calculate and claim the home office deduction,” said Acting IRS Commissioner Steven T. Miller in a statement. “The IRS continues to look for similar ways to combat complexity and encourages people to look at this option as they consider tax planning in 2013.”
The new simplified option is available starting with the 2013 return most taxpayers file early in 2014.
Currently, taxpayers are generally required to fill out a 43-line form (Form 8829), that carries some complex calculations of allocated expenses, depreciation and carryovers of unused deductions.
Taxpayers claiming the optional deduction will complete a significantly simplified form.
Homeowners using the new option 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 on the home as itemized deductions on Schedule A. These deductions need not be allocated between personal and business use, as is required under the regular method.
Business expenses unrelated to the home, such as advertising, supplies and wages paid to employees are still fully deductible.
Current restrictions on the home office deduction, such as the requirement that a home office must be used regularly and exclusively for business and the limit tied to the income derived from the particular business, still apply under the new option.
Further details on the new option can be found in Revenue Procedure 2013-13, posted Tuesday on IRS.gov.

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