Do you want to simplify your tax return, yet still claim a deduction for your home office? Beginning in tax year 2013 (returns that we will file in 2014), taxpayers may use a simplified option when figuring the deduction for business use of their home.
Note: This simplified option does not change the criteria for who may claim a home office deduction. It merely simplifies the calculation and recordkeeping requirements of the allowable deduction.
Highlights of the simplified option:
Standard deduction of $5 per square foot of home used for business (maximum 300 square feet).
Allowable home-related itemized deductions claimed in full on Schedule A. (For example: Mortgage interest, real estate taxes).
No home depreciation deduction or later recapture of depreciation for the years the simplified option is used.
Comparison of methods
Simplified Option | Regular Method |
---|---|
Deduction for home office use of a portion of a residence allowed only if that portion is exclusively used on a regular basis for business purposes | Same |
Allowable square footage of home use for business (not to exceed 300 square feet) | Percentage of home used for business |
Standard $5 per square foot used to determine home business deduction | Actual expenses determined and records maintained |
Home-related itemized deductions claimed in full on Schedule A | Home-related itemized deductions apportioned between Schedule A and business schedule (Sch. C or Sch. F) |
No depreciation deduction | Depreciation deduction for portion of home used for business |
No recapture of depreciation upon sale of home | Recapture of depreciation on gain upon sale of home |
Deduction cannot exceed gross income from business use of home less business expenses | Same |
Amount in excess of gross income limitation may not be carried over | Amount in excess of gross income limitation may be carried over |
Loss carryover from use of regular method in prior year may not be claimed | Loss carryover from use of regular method in prior year may be claimed if gross income test is met in current year |
Selecting a Method
Be sure to review this simplified method with us during your tax appointment, or call/email with any questions... DiSabatino CPA, 805.389.7300