Home Office Tax Deduction Has A New Simplified Option

This article was last edited on Feb. 16, 2016. For updated information on the home office deduction, visit Did Tax Reform Change the Home Office Deduction?

Whether you are self-employed or an employee, if you use a portion of your home for business, claiming the home office deduction is now easier. Beginning in tax year 2013, taxpayers may use a simplified option when determining the deduction for business use of their home.  It is important to note that this simplified option does not change the criteria for who may claim a home office deduction. It merely simplifies the calculation and recordkeeping requirements of the allowable deduction.

Simplified Option Differences

  • Standard deduction of $5 per square foot of home used for business, with a maximum 300 square feet.
  • Allowable home-related itemized deductions claimed in full on Schedule A. (For example: Mortgage interest, real estate taxes).
  • No home depreciation deduction or later recapture of depreciation for the years the simplified option is used.

Additional Information about Using the New Simplified Method

  • You may choose to use either the simplified method or the regular method for any taxable year.
  • You choose a method by using that method on your timely filed, original federal income tax return for the taxable year.
  • Once you have chosen a method for a taxable year, you cannot later change to the other method for that same year.
  • If you use the simplified method for one year and use the regular method for any subsequent year, you must calculate the depreciation deduction for the subsequent year using the appropriate optional depreciation table. This is true regardless of whether you used an optional depreciation table for the first year the property was used in business.

Full details on the new option can be found in the IRS Revenue Procedure 2013-13

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