The Internal Revenue Service has a new, simplified option that can provide eligible taxpayers an easier path to claiming the home-office deduction in 2013.
Almost 3.4 million taxpayers claimed deductions for business use of a home in tax year 2010, the most recent year for which figures are available.
The new optional deduction, capped at $1,500 per year based on $5 a square foot for up to 300 square feet, will reduce the paperwork and record-keeping burden on small businesses by an estimated 1.6 million hours annually.
"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. "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."
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Currently, those claiming the home-office deduction are generally required to fill out a 43-line form (Form 8829), often with complex calculations of allocated expenses, depreciation and carryovers of unused deductions. Taxpayers claiming the optional deduction will complete a significantly simplified form.
Though homeowners using the new option cannot depreciate the portion of their home used in a trade or business, 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.
The new simplified option is available starting with the 2013 return.
For more information go to irs.gov and search for Revenue Procedure 2013-13. The IRS welcomes public comment on this new option to improve it for tax year 2014 and later years. You can submit comments via email or regular mail.
w Email: Notice.Comments @irscounsel.treas.gov. Include "Rev. Proc. 2013-13" in the subject line.
w Mail: Internal Revenue Service, CC:PA:LPD:PR (Rev. Proc. 2013-13), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.
The deadline for comment is April 15.