New Simplified Rules for the Home Office Deduction in 2013

Traditionally, calculating the home office deduction on a self-employed or small-business tax return has been difficult. The deduction was based on actual expenses for the home office. These expenses may include mortgage interest, insurance, utilities, repairs, and depreciation. Generally, when using the traditional method, deductions for a home office are based on the percentage of your home devoted to business use. Therefore, you need to calculate the percentage of your home devoted to your home office as well as keep records of insurance, utilities, repairs, and depreciation.

Starting with the 2013 tax year, which tax returns will be filed in 2014, taxpayers can deduct home office expenses using a simplified method. The IRS simplified rate is $5 per square foot up to 300 square feet of home office space. This means you could deduct up to $1,500 per year using the simplified method.

You must meet the requirements that have historically applied. First, the home office must be a part of your home used exclusively for conducting business. In addition, the home office must be your principal place of business.

In addition, if you are employed and use your home office for business, you must not only meet the two requirements above, your home office must be for the convenience of your employer and you must not rent any part of your home to your employer.

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Tax laws and regulations change frequently, and their application can vary widely based on the specific facts and circumstances involved. You are responsible for consulting with your own professional tax advisors concerning specific tax circumstances for your self or business. If you have questions regarding tax issues specifically related to your personal or business circumstances, you should consult with your own professional tax advisor, accountant, or attorney.