Tax Note: The Simplified Home Office Deduction
by David Van Meter, M.S.Acc., Ph.D.
Great news for those of you who work from your home: the Treasury Department and the IRS have implemented, starting in Tax Year 2013, a very much simplified safe-harbor method for calculating a home office deduction! This new method greatly reduces the record-keeping associated with the home office deduction, and offers the additional benefit of potentially eliminating the ugly re-capture of depreciation when you sell your home. Additionally, if you use the simplified method, you can continue to claim the full mortgage interest deduction on your Schedule A, if that is pertinent to your situation. What is the catch, you might ask? Well, the maximum square footage allowed for the deduction is just 300 square feet, and the rate of the deduction is currently set at $5 per square foot.
Of course, there are restrictions on who can take the deduction. In a nutshell, the home office must be your principal place of business, or a place where you regularly meet clients, customers or patients. If it is a separate structure from your home but appurtenant, the space must be in connection with your business. If you are an employee, then the use of your home must be for the employer's convenience. If you think that this new and simplified approach to the home office may pertain to you, be sure to give your tax advisor a call for more details!