Jan 20

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Home Office Deduction Just Got Easier

On January 15, the IRS issued Rev. Proc 2013-13, which gives taxpayers a safe-harbor calculation for a home office deduction. Instead of a specific identification of the costs paid for the home office, taxpayers who elect this method can deduct $5 per square foot for the office, up to a maximum of 300 square feet or $1500 annually. Form 8829 (Expenses for the Business Use of Your Home) is not required if this optional method is elected.

The $5 per square foot deduction method cannot exceed the amount of gross income minus business deductions, meaning one cannot use the home office deduction to create a loss. Additionally, a taxpayer cannot carry over any undeducted loss to another tax year.

The underlying rules for obtaining a home office deduction have not changed – just the optional means of calculating the amount. This article provides the requirements for a home office deduction.  The new rule can be used for the 2013 tax return; 2012 uses the old rules.


About the author

David Nolte

I am a founding principal of Fulcrum Inquiry, an accounting and economic consulting firm that performs damage analysis for commercial litigation, forensic accountings, financial investigations, and business valuations. I am a Certified Public Accountant (CPA) and an Accredited Senior Appraiser (ASA), as well as having other professional credentials. I regularly serve as an expert witness involving damages measurement. My litigation-oriented resume is on Fulcrum's website.

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