If you work from home, deducting costs associated with your home
office on your tax return can be a money saver. But claiming this
write-off has been somewhat complicated -- until now, that is.
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The IRS recently announced a simplified option to make it easier
for taxpayers to calculate and claim the home-office deduction.
Although those who work at home won't be able to take advantage of
the simplified option on their 2012 returns, it will be available
for 2013 tax returns, which taxpayers will file in early 2014. The
IRS estimates it will reduce the paperwork and record-keeping
burden on small businesses by an estimated 1.6 million hours
Currently, to claim the home-office deduction you have to fill
out the 43-line Form 8829, which involves substantiating actual
expenses. with the new method, you don't deduct actual expenses.
Instead, you determine the amount of deductible expenses by
multiplying a prescribed rate ($5) by the square footage of the
area of your residence that is used for business purposes, not to
exceed 300 square feet. So that means the deduction is capped at
With the new option, you don't depreciate the portion of your
home used for business, and you don't have to allocate deductions
for mortgage interest, real estate taxes and casualty losses
between personal and business use. You'll simply claim these
expenses as itemized deductions on Schedule A. However, to claim
the home-office deduction under the new option, you still must use
the space regularly and exclusively for your business.
For more information, see IRS Revenue Procedure 2013-13.
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