People who work out of their home, whether for themselves or an employer, have a new option to cut down on paperwork due to the Internal Revenue Service.
The IRS on Friday announced a simplified, $5-per-square-foot deduction that people who maintain a home office may opt to use instead of the more complicated 43-line form now in circulation.
Nearly 3.4 million taxpayers claimed a “business use of a home” deduction in 2010, according to an IRS news release.
Who qualifies for the deduction is the simpler part of a two-part question. In general, if you run a business out of your home, the deduction is likely to be relevant.
The usual way to claim a deduction for a home office is with the 43-line Form 8829. The new option will be handled with a “significantly simplified form,” the IRS said in its release.
The deduction will be capped at $1,500, for an office space of up to 300 square feet.
The IRS estimates the rule change will save small businesses 1.6 million hours of bookkeeping a year.
Like the standard mileage deduction offered by the IRS, the new home-office deduction option involves trade-offs, including that homeowners can’t depreciate the portion of their home used in a trade or business, the IRS said.
Business expenses unrelated to the home, such as advertising, supplies and wages paid to employees are still fully deductible, the IRS said.
The new option will go into effect for 2013, so the soonest people will be able to use it is when they file in 2014.
To read about the new option in detail, go to www.irs.gov/pub/irs-drop/rp-13-13.pdf.