Options For The Home Office Deduction In 2013

Lee F Shaffer writes: If you're a small-business owner who works from home, you're already familiar with the home office tax deduction. But starting with your 2013 federal tax return, the Internal Revenue Service is offering you a simpler option for reporting the business use of your home. 

The new option doesn't change the rules for who may claim a home office deduction. Instead, it simplifies the calculations and recordkeeping requirements. That means it might save you a bunch of time, paperwork headaches and burdensome recordkeeping. 

Here are six facts you need to know about the new, simplified method for claiming the home office deduction on your 2013 tax return. 

Fact #1 
If you use the new method, you won't need to figure your deduction based on actual expense. Instead, you can simply multiply the square footage of your home office by a set rate. 

Fact #2 
The set rate for 2013 is $5 per square foot for the part of your home used exclusively and regularly for your business. The maximum footage allowed is 300 square feet. This means the most you can deduct when using the simplified method is $1,500 per year. 

Fact #3 
You can choose to use either the simplified method or the actual expense method for the tax year. Once you choose which method you're going to use for a specific tax year, you can't later change to the other method for the same tax year. 

Fact #4 
If you own your home and you use the simplified method, you can't depreciate your home office. You can still deduct other qualified home expenses, such as real estate taxes and mortgage interest. You won't need to allocate those expenses between personal and business use. (This allocation is required if you the actual expense method). You'll claim your home expenses as deductions on Form 1040, Schedule A, Itemized Deductions. 

Fact #5 
If you use the simplified method for the home office deduction, you can still fully deduct business costs that are unrelated to the home office. These might include expenses such as supplies, wages paid to employees and advertising. 

Fact #6 
If you use more than one home with a qualified home office in the same tax year, you can use the simplified deduction method for only one home that year. You can use the simplified method for one home office and actual expenses for any other home offices in the same tax year.