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Home Office Deduction is Now Simplified!
The home office deduction allows you to deduct certain expenses related to the operation of your home office from your taxable income. In past years, taking the home office deduction required you to make a variety of complex calculations. However, beginning in 2014 (tax year 2013), the IRS is offering a simplified home office deduction method.
The Regular Method
If you use the regular home office deduction method, you must keep track of all of the expenses related to the operation and/or maintenance of your home during the year. To determine the portion of these expenses that is deductible for your home office, you must calculate the percentage of your home that is used as an office and multiply this percentage by each of the expenses.
The Simplified Method
If you choose the simplified method of determining your home office deduction, only one calculation is required to determine the amount you can deduct. Simply multiply the number of square feet in your home office by $5. You don’t need to keep records of any specific expenses incurred, nor do you need to allocate them individually.
Although the simplified method is useful for many taxpayers, it isn’t the right choice for everyone. Some taxpayers who have kept records of their expenses may be able to claim a larger home office deduction under the regular deduction method. In addition, whereas the regular deduction method allows for carryover into the following year, the simplified method does not. Finally, while the regular method includes a depreciation deduction for the business use of your home, the simplified method doesn’t allow a depreciation deduction.