I’ve never taken the home-office deduction, because it’s so difficult to calculate. I might have to reconsider.
The Internal Revenue Service has announced a simplified, alternative method for determing the amount of expenses you can deduct for a qualified business use of a home.
“The standard method has some calculation, allocation, and substantiation requirements that can be complex and burdensome for small business owners,” the IRS says. “The simplified method is intended to reduce that burden.”
You may elect to use the simplified method for taxable years beginning on or after January 1, 2013. (The standard method still can be used.)
If you choose use the simplified method, you cannot deduct actual expenses related to the qualified business use of the home, according to the IRS. The amount allowed as a deduction when using the simplified method is in lieu of a deduction for your actual expenses.
The maximum deduction is $1,500. To calculate the deduction, multiply the allowable square footage (up to 300 square feet) by $5.
Qualified Business Use
A qualified business use of a portion of the home generally means:
1) Exclusive and regular use as the main place in which you conduct your business, or meet with customers, clients or patients;
2) Regular use as a storage area for products you sell in your business, or samples, if your home is the only place you conduct your business; and/or
3) Regular use in providing daycare services for children, the elderly, or disabled persons.
For detailed information, check out the IRS’s FAQ for the simplified method.
This article is provided for informational purposes only and is not intended to substitute for obtaining accounting, tax, or financial advice from a professional accountant or attorney! Do not act upon this information without seeking the service of a professional accountant.