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.

Special Tax Benefits for Military Families

image via

In the good ol’ United States of America, we love our servicemen and women and we try to treat them right.  One way we honor them is by making sure that the Tax Code is chock-full of tax benefits especially for the military.  And it’s not just fluff; these are good, practical benefits that are routinely acknowledged by the IRS.

Here are some popular tax benefits available to active members of the US Armed Forces:

  1. Some unreimbursed moving expenses are deductible in connection with a permanent change of station
  2. Military pay while serving in a combat zone is not taxable
  3. Military personnel get automatic extensions on many IRS deadlines, including the filing of a personal income tax returns, which could also delay collection of back tax debt
  4. The cost and upkeep of uniforms is deductible under certain circumstances
  5. Joint returns don’t need to be filed by both spouses when one is deployed (kind of a lame benefit, but a benefit nonetheless)
  6. Certain unreimbursed travel expenses available to reservists traveling away from home
  7. Subsistence allowances paid to ROTC students participating in advanced training are not taxable
  8. Certain expenses associated with transitioning back to civilian life (i.e., job search) are deductible

See IRS Pub 3 (Armed Forces’ Tax Guide) for more information.

Cat Lady is Better with Taxes than with Cats

Oakland’s “Cat Lady” may have found tax relief by beating the IRS, but now the Alameda County District Attorney is pursuing felony animal cruelty charges against her.

You may remember the story of Jan Van Dusen and all her cats. She, at one time, was keeping nearly 100 cats in a 1,500 square foot home in West Oakland. Her tax case was focused on the $10,000/year expenses for cat food, shots, cleaning, etc. that she claimed to be tax exempt. The IRS refused to allow her deductions at the  administrative level. But a Tax Court overturned the IRS in finding that Van Dusen did in fact qualify for her claimed charitable contribution deductions.

Allegedly her foster pets were not being cared for properly, which is no surprise — how could one person take care of so many cats? Local animal control officers confiscated her pets in October and the district attorney’s office is now pursuing the uncommonly severe felony animal abuse charge. More details here.

The Cat Lady faces up to 3 years in prison and a $20,000 fine if convicted. She has pleaded not guilty.