Do you have an office in your home? If so, you know how complicated the IRS rules can be when it comes to keeping records for your tax deduction.
Good news. If you haven’t claimed the home office deduction recently, the IRS has simplified method of claiming a home office deduction.
Under the updated procedure, you won’t be required to keep detailed records of the expenses related to your home office nor claim depreciation on your home.
Beginning in tax year 2013, the IRS has announced a new optional deduction of $5 per square foot for up to 300 square feet of home office space. The maximum annual deduction is limited to $1,500.
Importantly, the new method does not relax the rules for who is eligible to claim the deduction, and the new method is optional. If you are eligible for a larger deduction, you can still support that deduction with detailed records.
The deduction of expenses that aren’t related to the home – such as wages, supplies and other business expenses – is not affected. Those deductions are still available, even if you choose the new method.
If you use the new option, you will still be able to claim allowable mortgage interest, real estate taxes and casualty losses on your home as itemized deductions. You won’t have to allocate these amounts between personal and business use, as the regular method requires.