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Ask A CPA - Tax Law changes - 2013

Home Office Deduction - Simplified Method - 2013

The IRS today created an optional safe harbor method for individual taxpayers to use in determining the amount of deductible expenses attributable to certain business use of a residence during the tax year. The new optional deduction under the safe harbor is capped at $1,500 per year. This cap is based on $5 a square foot for up to a maximum of 300 square feet. Taxpayers claiming the new safe harbor will not be allowed to depreciate the portion of their home used in a trade or business, but can claim allowable mortgage interest, real estate taxes, and casualty losses on the home as itemized deductions on Schedule A, Form 1040. These deductions will not need to be allocated between personal and business use, as required under the regular method. 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.

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