2014 IRS Home-Office Deduction Changes

Many things about filing taxes remain the same year after year. This is especially true for people who work from home offices and claim these expenses on their taxes. However, for taxes filed in 2014 (for tax year 2013) there represents some interesting changes in the practice of claiming home-office deductions that most filers will find interesting.

New Standard Deduction

Just as there has been a standard deduction for business auto mileage, there is now a standard deduction option available for home offices. The deduction amount is five dollars per square foot for a maximum of 300 square feet. This allows for a maximum deduction of $1,500.

It’s not just the deduction itself that has changed, though. Rather than filling out a 43-line form in order to claim the deduction, the paperwork is now reduced to one line on the Schedule C form instead.BankRate.com reports that the IRS estimates this single change will save taxpayers approximately 1.6 million hours of paperwork and record keeping.

This Change is Optional

The good news for those who enjoy the paperwork and number crunching involved in the “old” way of deducting home office expenses is that you still have the option of claiming the actual expenses rather than choosing the standard deduction. The IRS understands that this is not a one-size-fits-all solution. For those who prefer a simpler method of filing, though, the standard deduction is a welcome option.

Considerations before Subscribing to the Simple Method

You have the option to use either method for any year when filing your taxes. However, the IRS states that if you use the simplified deduction for one year and then choose the traditional method of deducting any following you year, you must calculate depreciation deductions regardless of using it for the first year the property was used in the business.

Some Things Remain the Same

Despite the changes in home-office deduction options for 2014 tax filings, some things remain the same. One, is the requirement that the home office is a space set aside for the regular and exclusive use of conducting business. The home office must also be the principal place of your business in order to meet the IRS requirement for a home office deduction.

The deduction is not acceptable if your home office is simply a place that is convenient to take care of after-hour work for your employer. The IRS is very specific stating, “If the use of the home office is merely appropriate and helpful, you cannot deduct the expenses for the business use of your home.”

The simplified approach to claiming a home office for tax year 2013 is a welcome relief for many home business owners who are looking for a simpler way of claiming their home office expenses. Pay attention to the details and enjoy a simplified filing experience.