IRS Announces Optional $1,500 Home Office Deduction in Lieu of Depreciation

IR-2013-5:  IRS Announces Simplified Option for Claiming Home Office Deduction Starting This Year; Eligible Home-Based Businesses May Deduct up to $1,500:

The IRS today announced a simplified option that many owners of home-based businesses and some home-based workers may use to figure their deductions for the business use of their homes. In tax year 2010, the most recent year for which figures are available, nearly 3.4 million taxpayers claimed deductions for business use of a home (commonly referred to as the home office deduction).

The new optional deduction, capped at $1,500 per year based on $5 a square foot for up to 300 square feet, will reduce the paperwork and recordkeeping burden on small businesses by an estimated 1.6 million hours annually. ...

The new option provides eligible taxpayers an easier path to claiming the home office deduction. Currently, they are generally required to fill out a 43-line form (Form 8829) often with complex calculations of allocated expenses, depreciation and carryovers of unused deductions.  Taxpayers claiming the optional deduction will complete a significantly simplified form.

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.

The new simplified option is available starting with the 2013 return most taxpayers file early in 2014. Further details on the new option can be found in Rev. Proc. 2013-13, 2013-6 I.R.B. ___ (Feb. 4, 2013).

• Accounting Today, IRS Offers Simpler Option for Calculating Home Office Tax Deduction
• Bloomberg, IRS Announces Simpler Rules for Home-Office Deductions
• Forbes, Deducting Your Home Office (Read: Couch) Just Got a Whole Lot Simpler
• White House Blog, The Home Office Tax Deduction: Simplifying Rules and Helping Small Business Owners Succeed