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New year, new taxes. Taxes aren't due until April, but if you're smart, you'll get an early start on getting documents together for your CPA. A few weeks back we gave you tax-preparation tips for small firms; today, we'll discuss one of the more confusing deductions for business owners -- the home office deduction.
The home office deduction has been confusing -- until now. For the 2013 tax year, the IRS has simplified the method for determining the home office deduction. While the method for deciding whether you qualify remains the same, the calculation is now easier.
Here's how to figure out whether you qualify, and if you do, how to calculate your home office deduction.
Whether you qualify for the home office deduction relies primarily on two factors: (1) regular and exclusive use; and (2) principal place of business. Your home need not be the only place of business, but your use must be "substantial and regular." Also, you need not be a business owner, you can use this deduction if you are an employee so long as you work from home for the "convenience of your employer" and you are not receiving rent from your employer.
The IRS's new simplified method for calculating the home office deduction differs in large part in three major ways: (1) rather than determining the actual percentage of your home used for business, you are allowed a standard deduction of $5/square foot, with a 300 square foot maximum; (2) home-related deductions that are allowed may be claimed in full; and (3) there is no home depreciation deduction, nor can depreciation be captured for the years the simplified method is used.
You may choose whether to use the standard, or new simplified method, and you can change the method each year. To determine which calculation to use, talk to your tax preparer about what method would best suit your needs.What method will you use to calculate your home office deduction? Let us know on Facebook at FindLaw for Legal Professionals.
Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.
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