Home Office Deduction- Changes for 2013
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This deduction has been available for a long time now, however with the tax year beginning January 1st, 2013 (filing in 2014), the Internal Revenue Service issued Rev Proc. 2013-13. This revenue procedure details an optional safe harbor available to individual tax payers for calculating a home office deduction.
The individual can claim the Home Office Deduction based on either the Simplified Method or the Regular Method (Details Follow).
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- A standard deduction of $5 per sq foot for a home used for business up to a maximum of 300 sq feet.
- No home office depreciation deduction is allowed nor is a later recapture for the years the simplified option was used.
- Allowable home related expenses, such as, Mortgage Interest or Property Taxes is claimed in full on Schedule A.
- Expenses in excess of income cannot be carried forward. Nor can a loss carryover from a previous regular method used be claimed.
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- Actual Expenses determined for percentage of the home used for the business will be used.
- Home related expenses will be apportioned between Schedule A & the business Schedule C or F.
- Depreciation and depreciation recapture for portion of home used for business can be claimed.
- Amount in excess of gross income limitation can be carried forward.
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- Either of the above methods can be used for the tax year.
- Once the method is chosen for a taxable year, it cannot be changed to the other method for the same tax year.
- If the simplified option is used one year & later changed to the regular method, the depreciation for the subsequent year should be calculated using appropriate optional depreciation table.
- The regular method requires detailed record keeping but the simplified option does not.
- The home office deduction under the simplified option is limited to $1500.
- Both the methods should be compared to yield the most beneficial deduction to the tax payer.
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