For tax years that being on or after January 1, 2013, you can elect to use a simplified method to deduct home office expenses. The method allows you to take the square footage of the home office times $5 up to 300 square feet with no need for documentation of the expense. This gives you a maximum deduction of $1,500. In addition you can deduct your mortgage interest and real estate taxes in full as an itemized deduction on Schedule A.
You still have to meet the exclusive use on a regular basis rule to qualify.
There are other limitations as well:
- Taxpayers with more than one qualified business use of the same home for a tax year and who elect the safe harbor must use the safe harbor for each qualified business use of the home.
- Taxpayers with qualified business uses of more than one home for a tax year may use the safe harbor for only one home for that tax year.
- A taxpayer who has a qualified business use of a home and a rental use of the same home cannot use the safe harbor for the rental use.
This is a long overdue simplification of the rules pertaining to office in the home. While this is not available for tax returns filed until 2014, it is worth taking into consideration for tax planning for next year.