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IRS' Home Office Tax Deduction Changes for 2013

By Tanya Roth, Esq. on January 22, 2013 | Last updated on March 21, 2019

The home office tax deduction used to be seen as a potentially scary deduction to take. Many tax experts called it a red flag for an audit.

Starting next year, however, it looks like the deduction won't be so difficult to take anymore.

In addition to its audit risks, the home office deduction was also cumbersome. In order to get the deduction, taxpayers would have to turn in Form 8829 Expenses for Business Use of Your Home.

Things are looking different, going forward. The Internal Revenue Service just announced a new way to take the home office tax deduction.

Instead of filling out Form 8829, beginning with your 2013 taxes (the ones you'll file next year) you will now be able to deduct $5 per square foot for up to 300 square feet of office space -- up to a maximum of $1,500.

Here's how the old (current) deduction works:

  • You can divide the square footage of the office space used in your home by the entire square footage of the home. You come up with a percentage.
  • Take that percentage and apply it to the expenses of the home.

For example, if your office space takes up 10 percent of your home, you can deduct 10 percent of your rent and other home expenses.

This is a good news when it comes to preparing your income tax returns, but does it really change anything? What does it mean for the home office tax deduction altogether?

Not much. T]he rules haven't really changed. If the IRS doesn't feel that you're really using your house for business, then you can still be denied that deduction. So the new filing requirement really only changes the "how," and not the "what."

And remember: Business use of your home isn't for you to decide. The IRS already has rules in place for what constitutes business use of a home office.

Home office tax deductions can only be taken if your use of the space qualifies as business use (see our previous post on this). Check out our related resource links below for more information on what qualifies as a business use of a home office.

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