If you work from home, you will want to read this:
There is a simpler option to figure the deduction for business use of your home. The new option will save you time because it simplifies how you figure and claim the deduction. It will also make it easier for you to keep records. It does not change the rules for who may claim the deduction.
Here are six facts from the IRS about the home office deduction.
1. Generally, in order to claim a deduction for a home office, you must use a part of your home exclusively and regularly for business purposes. Also, the part of your home used for business must be:
- Your principal place of business, or
- A place where you meet clients or customers in the normal course of business, or
- A separate structure not attached to your home. Examples might include a studio, garage or barn.
2. If you use the actual expense method, the home office deduction includes certain costs that you paid for your home. For example, if you rent your home, part of the rent you paid could qualify as a business expense. If you own your home, part of the mortgage interest, taxes and utilities you paid could qualify. The amount you can deduct usually depends on the percentage of your home used for business.
3. Beginning with 2013 tax returns, you may be able to use the simplified option to claim the home office deduction instead of claiming actual expenses. Under this method, you multiply the allowable square footage of your office by a prescribed rate of $5. The maximum footage allowed is 300 square feet. The deduction limit using this method is $1,500 per year.
4. If your gross income from the business use of your home is less than your expenses, the deduction for some expenses may be limited.
5. If you are self-employed and choose the actual expense method, use Form 8829, Expenses for Business Use of Your Home, to figure the amount you can deduct. You claim your deduction on Schedule C, Profit or Loss From Business, if you use either the simplified or actual expense method.
6. If you are an employee, you must meet additional rules to claim the deduction. For example, in addition to the above tests, your business use must also be for your employer’s convenience.
We love Helping you stay “Financially Balanced”.