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The IRS has announced a new simplified, optional method of claiming a home office deduction beginning in 2013.

Simplified Home Office Deduction Option for 2013

  • 1/23/2013

The IRS has announced a new simplified, optional method of claiming a home office deduction. More than 3 million taxpayers claimed deductions for business use of a home in 2010. It normally requires the taxpayer to complete the 43-line Form 8829. Under the new procedure, a significantly simplified form is used.

The new method is expected to reduce paperwork and recordkeeping for small businesses by an estimated 1.6 million hours annually, the IRS says. The new optional deduction is limited to $1,500 per year based on $5 per square foot for up to 300 square feet.

A few limitations

Homeowners using the new option will not be allowed to depreciate the portion of their home used in a trade or business. However, they will be able to claim allowable mortgage interest, real estate taxes, and casualty losses on the home as itemized deductions on Schedule A of Form 1040. These deductions do not need to be allocated between personal and business use, as is required under the regular method.

The deduction of expenses that are not related to the home, such as wages and supplies, is unaffected and those deductions are still available to those using the new method.

The new method retains certain restrictions applicable under the regular method, such as the requirement that a home office be used regularly and exclusively for business. The new option is available beginning with the 2013 return that most taxpayers will file in 2014.

Open for comment

Comments are invited by email prior to April 15, 2013. Include “Rev. Proc. 2013-13” in the subject line.