Home Office Deduction-Changes for 2013

TaxConnections Picture - home officeIf you use your home for business, there are expenses you can deduct on your tax return. The home office deduction is available to both home owners & renters alike. The home must be used by a self-employed individual or an employee who works from home for his employer’s convenience.

This deduction has been available for a few years now, however with the tax year beginning January 1st, 2013 (filing starting January 1st, 2014), the Internal Revenue Service issued Rev Proc. 2013-13. This revenue procedure details an optional safe harbor available to individual tax payers for calculating a home office deduction.

The individual can claim the Home Office Deduction based on either the Simplified Method or the Regular Method (Details Follow).

Simplified Method: 

•  A standard deduction of $5 per sq foot for a home used for business up to a maximum of 300 sq feet.

•  No home office depreciation deduction is allowed nor is a later recapture for the years the simplified option was used.

•  Allowable home related expenses, such as, Mortgage Interest or Property Taxes is claimed in full on Schedule A.

•  Expenses in excess of income cannot be carried forward. Nor can a loss carryover from a previous regular method used be claimed.

Regular Method:

•  Actual Expenses determined for percentage of the home used for the business will be used.

•  Home related expenses will be apportioned between Schedule A & the business Schedule C or F.

•  Depreciation and depreciation recapture for portion of home used for business can be claimed.

•  Amount in excess of gross income limitation can be carried forward.

What Method Can I Use?

•  Either of the above methods can be used for the tax year.

•  Once the method is chosen for a taxable year, it cannot be changed to the other method for the same tax year.

•  If the simplified option is used one year & later changed to the regular method, the depreciation for the subsequent year should be calculated using appropriate optional depreciation table.

•  The regular method requires detailed record keeping but the simplified option does not.

•  The home office deduction under the simplified option is limited to $1500.

•  Both the methods should be compared to yield the most beneficial deduction to the tax payer.


Revenue Procedure 2013-13

I am Manasa Nadig, enrolled to practice and represent taxpayers with the Internal Revenue Service. I have been in the business of Tax Preparation & Tax Planning since 1999. My firm, MN Tax Solutions, LLC is based in Michigan, USA. Please connect with me on TaxConnections for more information about myself & the services provided by my firm.

Facebook Twitter LinkedIn Google+ 

Subscribe to TaxConnections Blog

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

4 comments on “Home Office Deduction-Changes for 2013

    • Thanks Steve! You are right, the simplified method is beneficial to those who have lower home office expenses. The fact that there is an option to choose between the 2 makes life easier to many who don’t keep track of all the expenses.

  • Dear Manasa, Very informative page. Thank you for putting this all together for peple like me having home office!

  • Thank you very much Yoganjali. I am glad you can make use of this information. Keep coming back for more informational posts.

Comments are closed.