IRS moves to simply home-office deduction

To claim a deduction, you must use your home office only for business — and nothing else.
John Tlumacki /Globe Staff/File 2012
To claim a deduction, you must use your home office only for business — and nothing else.

If you’re working on your 2012 tax return, you probably aren’t in the mood to consider changes that await you next year.

Nonetheless, the Internal Revenue Service wants to hear from you now about something it’s going to implement this year that could affect the return you file in 2014.

Recently, the IRS unveiled a streamlined option for claiming a home-office deduction. Your suggestions could help improve the change for tax year 2014 and later, the IRS says. The deadline for comment is, yes, April 15.


Nearly 3.4 million taxpayers claimed deductions for business use of a home in 2010, the most recent year for which data are available. But many people eligible for the deduction might not be doing so because it’s too complicated to work out, according to the National Association for the Self-Employed.

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Its study found that 42 percent of the organization’s members who qualify for the deduction don’t take it.

“They don’t take the deduction because they fear if they take it and make a mistake, it will trigger an IRS audit,” said Kristie Arslan, the group’s chief executive.

Currently, if you qualify for the home-office deduction, you have to fill out a 43-line form that requires calculations of allocated expenses, depreciation, and carryovers of unused deductions. Makes my head hurt just to think of it.

Sixty percent of the association’s members said if there were an option to take a standard home-office deduction rather than itemizing, they would take it.


Under the new option, taxpayers can fill out a simpler form, but the deduction is capped at $1,500 per year, based on $5 a square foot for up to 300 square feet.

Arslan said her group endorsed the $1,500 as a trade-off for a less cumbersome process.

“I think a lot of business owners would consider the standard deduction, considering what they would save in time or the money they would spend to hire someone to help them get the deduction,” she said.

Makes sense to me.

The home-office deduction is available for homeowners and renters. Arslan said that if the space you dedicate qualifies, all costs associated with maintaining that part of your home — mortgage interest, insurance, utilities, repairs, and depreciation — would be deductible. What’s not changing is the requirement that a home office be used regularly, and exclusively for business. And the key here is “regular and exclusive.”


It’s the exclusive part that can get folks in trouble. You have to dedicate a specific area of your home to conduct your business or trade or to meet with clients or customers. You do not meet the requirements if the area of your home is also used for personal purposes.

Here’s an example from the IRS: Let’s say you’re a lawyer who uses the den or family room to write legal briefs. The family also uses the room to play games and watch television. The room is therefore not exclusively used for business, so you can’t claim the deduction.

To find out what qualifies as a deductible business expense, go to Search for “Deducting Business Expenses” and scroll down to “Business Use of Your Home.” The deduction can be limited based on the income of your business or if your business is losing money. All this makes my head hurt even more. Thankfully, a short video on YouTube explains how to qualify for the deduction. Search for “home office deduction.”

If you want to comment on the simplified home­deduction option, send e-mail to this address: Put “Revenue Procedure 2013-13” in the subject line.