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February 16, 2013

New Safe Harbor for 2013 Home Office Deductions

The IRS recently released a Revenue Procedure outlining a safe-harbor method for claiming the home office deduction for calendar year 2013 and beyond.  This option does not eliminate the method that has been previously allowed but believing that the current method is too complex for many situations, the IRS has outlined this new safe-harbor calculation.

There are a number of guidelines and rules to qualify to claim the home office deduction, but if you qualify, this revenue procedure provides a simplified calculation - in very general terms, you are allowed $5 per square foot of qualifying home office space per year for up to 300 square feet of home office for a maximum deduction of $1,500 per year.  No depreciation calculations are required and certain expenses, such as mortgage interest and real estate taxes, are claimed as an itemized deduction and not included in the home office calculation when using the safe-harbor method.

There are a number of considerations, including if the safe-harbor is the best choice for your tax situation.  While it is a simplified method, the historical method using Form 8829 may yield a better tax result if you are willing to maintain the required records and documentation to properly support your home office requirements.

Please contact our office if you have further questions or if we can be of assistance to you or your business.

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