There’s a new, simpler home office deduction this year that could very well save you a lot of time but, in most cases, won’t save you as much as money as the long form that everyone despises.
For those people who work at home, even if they only do it part time, deducting home office costs is a great way to save money on taxes. That being said, the 43 line IRS form that needs to be filled out in order to do it has always been a huge challenge, sometimes so much so that people have actually lifted out of their tax planning and sacrificed the deductions completely.
This year however there is a new and more simplified home office tax reduction. You simply take $5 per square foot for 300 feet, or $1500, and you’re done, quick and easy. The trade-off is that you won’t be able to deduct as much as you would using the older, more involvement. When you consider that the average home office deduction, at least as far as the IRS reports, is approximately $3000, you might well be giving up a good bit of money if you’re eligible for more deductions than the $1500 cap the new system gives you.
What exactly constitutes a Home Office?
Before considering any of this however, it’s a good idea to know exactly what constitutes a home office. First, it’s a room or area of your home that you use exclusively and regularly for business. Please either your principal place of business or you see clients are customers there regularly, as well as patients.
As with most tax rules there are exceptions to the exclusive rule. One says that if you store products from your business in a different area of your home than where you actually do your work, you can use that storage space for other activities such as watching TV. Also, if you travel a lot and thus aren’t doing all of your work from home, but still do all of your essential work tasks there like billing and so forth without any other location to do these functions, you still qualify for the home office deduction.
If your employer requires that you work from home, and you don’t charge them rent, you can also deduct your home office. This however must be done as your employers convenience, not yours. If, for example, you only use your home office to finish reports at night or sometimes work on the weekends instead of going to your office, you won’t be able to claim the home office deduction.
Also covered under this tax break are separate structures that you own on your property like an attached garage that you might have converted into your office. Since the IRS looks at the fact that your family would be less likely to use a separate structure as part of their regular “living or play area” it doesn’t have to be your main place of business in order for to qualify for your home office deduction.