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.
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