IRS Announces Simplified Home-Office Deduction Safe Harbor

By: John J Kasperek, E.A.

IRS has released Rev. Proc. 2013-13, providing a taxpayer an optional safe-harbor method starting for Year 2013 to determine the business use of home deduction.

When electing this method, a taxpayer is to multiply the allowable square footage by $5 to calculate the deduction. The allowable square footage is the portion of the house used in a qualified business use, but not to exceed 300 square feet. The maximum a taxpayer can deduct annually under the safe harbor is $1,500.

Currently, a taxpayer has to fill out a 43-line form that requires calculations of allocated expenses, depreciation and carryovers of unused deductions.

This new new streamlined option should help with taxpayers who find the current method is too complicated. According to the National Association for the Self-Employed, 42% of its eligible members don’t take it.

I think this is a move in the right direction to simplify the lives of small business owners and home office workers.