Tax Relief For The Home Office Tax Deduction Available in 2013

The home office deduction, while useful, is complex and often the bait for an audit trap. Beginning in tax year 2013, Congress has implemented an optional standard home office deduction in order to make the home office deduction more available to taxpayers in the future.

Pursuant to Internal Revenue Service (IRS) Revenue Procedure 2013-13, beginning next tax season, there will be an optional safe harbor method that individual taxpayers may use to determine the amount of deductible expenses attributable to certain business uses of a residence throughout the tax year. This safe harbor method is an alternative to the burdensome calculation and substantiation of actual expenses needed to satisfy Internal Revenue Code § 280A. This new tax relief procedure is effective beginning on or after January 1, 2013.

These new tax relief provisions allow taxpayers who use their residences for qualifying business purposes to compute the allowable home office expense deduction on the basis of $5 per foot of qualifying home office space per year, up to 300 square feet. The maximum tax deduction allowed when using the new safe harbor provisions is the lesser of $1,500; or the gross income derived from the qualified business use of the home reduced by qualified business deductions.

The new safe harbor option for business home use does away with the previously time consuming calculations and record keeping of actual expenses. However, the traditional calculation method may allow for a greater deduction than allowed under the new safe harbor business home use provisions. Like the decision to take the standard deduction or itemize deductions on your tax return, give yourself time and review your tax situation carefully to ensure you’re not paying excessive taxes in exchange for convenience.

 
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