For those of you that work from home there is some good news for the 2013 tax year. The IRS has rolled out a simplified process for claiming the home office deduction. In years past the deduction hinged on the office’s square footage as a percentage of the total dwelling. The new method allows for a much easier calculation: $5 per square foot, with a 300 square foot max, or $1,500.
In addition to the simplified calculation, the new method has the following differences from past years:
- home related itemized deductions claimed in full on Schedule A
- no deprecation deduction
- no recapture of deprecation upon sale of home
- amount in excess of gross income limitation may not be carried over
- loss carryover from use of regular method in prior year may not be claimed
Of course the same rules apply, that the home office must be exclusively used on a regular basis for business purposes. While these restrictions didn’t change, the fact remains that the new method is much easier to calculate the home office deduction. Additionally, it could create a larger home office deduction for those with lower mortgage payments or rents, or smaller home offices in relation to the entire dwelling.
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