If you’ve been self-employed for some time now, you most likely know all about the home office deduction. Basically, if where you work from home is exclusive used for your business, you can take a deduction on your taxes for it.
However, you probably also know that figuring out if you have a dedicated office can be a real pain in the neck. The IRS has typically had some pretty strict and confusing rules about what constitutes a home office, and if you went outside those boundaries you were in a world of hurt (i.e. penalties, fees and who knows what else.) This could also cause havoc on other deductions as they were dependent on you having a home office. Plus, the form itself was a mile long.
Luckily, the IRS heard everyone’s cry of anguish and has softened the rules…well, for next tax season at least. Starting in early 2014, for tax year 2013, rules for home business deductions will be much simpler, with the IRS claiming the new rules will save taxpayers 1.6 MILLION hours a year (…potentially per person).
Instead of filling out the ridiculous 43 line Form 8829, you simply take a deduction capped at $1,500 per year based on $5 a square foot for up to 300 square feet. You still have to have a dedicated space, but claiming it became much simpler. In fact, it’s almost unreal.
Best of all, it doesn’t seem like it will affect the rest of your deductions. If you usually deduct advertising, supplies, and other business expenses, then expect to deduct them like normal next year. This change so far just offers a fix for the complicated nature of the home office deduction.
Remember this isn’t for this year, it’s for doing your 2013 taxes in early 2014. So just one more year of suffering through the mess this year and 2014 will be a piece of cake! For more information on the change, check out the IRS’ announcement.