Contact UsCan you tell me what is covered under the new flat rate home office tax deduction?
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Tax Professional Answers
Steven Potts JD EA
Generally, in order to claim a deduction for a home office, you must use a part of your home exclusively and regularly for business purposes. In addition, the part of your home that you use for business purposes must also be: •your principal place of business,
or a place where you meet with patients, clients or customers in the normal course of your business,
or a separate structure not attached to your home. Examples might include a studio, workshop, garage or barn. In this case, the structure does not have to be your principal place of business or a place where you meet patients, clients or customers.
Current restrictions on the home office deduction, such as the requirement that a home office must be used regularly and exclusively for business and the limit tied to the income derived from the particular business, still apply under the new option.
Starting in 2013, the IRS will offer a standard home office deduction of $5 per square foot, up to 300 feet. This makes the total deduction a maximum of $1,500. Just like the standard deduction taken on a personal return, this will require much less time and paperwork. The IRS calls the new deduction an “option,” indicating that the old method of calculating your deduction is still available, too.
Though homeowners using the new option cannot depreciate the portion of their home used in a trade or business, they can claim allowable mortgage interest, real estate taxes and casualty losses on the home as itemized deductions on Schedule A. These deductions need not be allocated between personal and business use, as is required under the regular method.
It is questionable whether there will be a benefit using the new method. Most people who are truly eligible for home office expenses frequently have more than $1,500 of qualified deductions for their home office and the new, easier, method is limited to $1,500.
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582 weeks ago
or a place where you meet with patients, clients or customers in the normal course of your business,
or a separate structure not attached to your home. Examples might include a studio, workshop, garage or barn. In this case, the structure does not have to be your principal place of business or a place where you meet patients, clients or customers.
Current restrictions on the home office deduction, such as the requirement that a home office must be used regularly and exclusively for business and the limit tied to the income derived from the particular business, still apply under the new option.
Starting in 2013, the IRS will offer a standard home office deduction of $5 per square foot, up to 300 feet. This makes the total deduction a maximum of $1,500. Just like the standard deduction taken on a personal return, this will require much less time and paperwork. The IRS calls the new deduction an “option,” indicating that the old method of calculating your deduction is still available, too.
Though homeowners using the new option cannot depreciate the portion of their home used in a trade or business, they can claim allowable mortgage interest, real estate taxes and casualty losses on the home as itemized deductions on Schedule A. These deductions need not be allocated between personal and business use, as is required under the regular method.
It is questionable whether there will be a benefit using the new method. Most people who are truly eligible for home office expenses frequently have more than $1,500 of qualified deductions for their home office and the new, easier, method is limited to $1,500.