The IRS’ Home-Office Tax Deductions

The Staff at Surepayroll writes: So with your laptop, cell phone and padded chair at the head of the table, your dinning room sees more conference calls than dinner parties these days. Does this mean you can write the room off as a home office to the IRS? Possibly.  According to the IRS (www.irs.gov), whether you’re self-employed or an employee, if you use a portion of your home for business, you may be able to take a home office deduction. However, there are some stipulations.

The IRS states that, generally, in order to claim a business deduction for your home, you must use part of your home exclusively and regularly as your principal place of business, or as a place to meet or deal with patients, clients or customers in the normal course of your business. Or, you must use your home office in any connection with your trade or business where the business portion of your home is a separate structure not attached to your home.
The Freelancers Union (http://www.freelancersunion.org) states that since 2008, roughly 42 million folks now work as freelancers in the United States. According to the IRS, in order for any of these individuals to claim a home office deduction on their taxes, they must abide by the following regulations:

1. For certain storage use, rental use, or daycare-facility use, you are required to use the property regularly but not exclusively.

2. Generally, the amount you can deduct depends on the percentage of your home used for business. Your deduction for certain expenses will be limited if your gross income from your business is less than your total business expenses.

3. Adherence to specific rules for qualified daycare providers and for persons storing business inventory or product samples.

4. Completion of Form 8829, Expenses for Business Use of Your Home. This is for those who are self-employed and want to figure their home office deduction and report those deductions.

5. For an employee, additional rules apply for claiming the home office deduction. For example, the regular and exclusive business use must be for the convenience of your employer.
The IRS is not known for simplicity, but for those who can make the claim for a home office deduction, the process just got a little (gasp) easier.

According to Forbes, the IRS introduced its Rev. Proc 2013-13, or “safe harbor” method for the tax year beginning January 1, 2013. The new method allows taxpayers easily calculate their 2013 deduction for their home office. All it takes is for an individual to multiply the square footage of the area of his or her home that is used strictly for business purposes by the prescribed rate. The sum of that rate is the taxpayer’s home office reduction.
For those who apply for a home office deduction, the process could be as easy as conducting a conference call in your pajamas.