expenses; just multiply the square footage of
your home office by the rate, up to the maximum allowed, and take your deduction (see
chart on previous page).
The rate is $5 per square foot of the part
of your home used for business. The maximum footage allowed is 300 square feet. That
means the most you can deduct is $1,500 per
year. Not bad, and so simple. You might not
even need a calculator to figure this out.
You can choose either this simplified
method or the old-fashioned actual expense
method for any tax year. This means you can
choose each year which method to use on
your tax return. You cannot change methods
in the same year, though.
Other considerations. If you use the
simplified method and you own your own
home, you cannot depreciate your home
office, but you can still deduct other qualified
home expenses, such as mortgage interest and
real estate taxes, without allocating these
expenses between personal and business use.
(If you use the actual expense method, you’ll
need to allocate these expenses.)
You can still fully deduct business
expenses that are not related to your home if
you use the simplified method. These may
include costs such as advertising, supplies and
wages paid to your employees.
By the way, if you store materials or products in your garage, that qualifies for the
home office deduction.
Talk with your accountant to see if you
qualify and if the new simplified method for
deducting a home office is right for you. Or,
check it out yourself by going to www.irs.gov
and getting Publication 587, Business Use of
The IRS is also on You Tube now; check
out its video on the simplified home office
deduction at www.youtube.com (search
“Simplified Home Office Deduction”). C
Author, speaker and certified financial plan-ner Steve Hoffman is a tax professional who
spent 15 years at the IRS.
show that you use your home as your principal
place of business. If you conduct business at a
location outside your home, but also use your
home substantially and regularly to conduct
business, you may qualify for a deduction.
For example, if you have in-person meetings with patients, clients or customers in your
home in the normal course of your business,
even though you also carry on business at
another location, you can deduct your
expenses for the part of your home used exclusively and regularly for business.
You can deduct expenses for a separate
free-standing structure, such as a studio, garage
or barn, if you use it exclusively and regularly
for your business. It does not have to be your
principal place of business or the only place
where you meet patients, clients or customers.
Additional tests for employee use. If
you are an employee and you use a part of your
home for business, you may qualify for a
deduction for its business use. You must meet
the tests discussed above, plus:
• Your business use must be for the
convenience of your employer.
• If the use of the home office is merely
“appropriate and helpful,” you cannot deduct
expenses for the business use of your home.
The simplified method. If you qualify
for a deduction, a new option for calculating
the amount on your tax return is the “simpli-
fied method.” This option does not change
the rules for who may claim a home office
deduction. It merely simplifies the calculation
and record-keeping requirements. It can save
you a lot of time and will require less paper-
work and record keeping.
You can use the simplified method when
you file your 2013 tax return next year.
Unlike the regular method, you won’t need to
calculate your deduction based on actual
CONTINUED FROM PAGE 29
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