A while back I wrote a post called “More than you want to know about a home office”.  While that is all still relevant and accurate information, there is now a new thing to report on the home office front.

In a surprising, but generally delightful twist, the IRS has come up with a standard amount for the home office deduction.  The standard amount is $5 per square foot up to a maximum of 300 square feet, for a total maximum of $1,500. 

The standard deduction means you don’t have to worry about the utilities, the insurance, repairs, etc.  For a homeowner, the home mortgage interest and property taxes are still going to be deductible on Schedule A if you claim the standard home office deduction.

Depreciation on your house isn’t being calculated and deducted so there is no depreciation recapture when you later sell your house.  This seems like the #1 benefit, although it is a relatively hidden aspect of the home office standard deduction. 

Each year you can choose to use the standard deduction or the normal method.  Once you file your return and elect to use a method, you are committed to that method for the year, but you can change for the next tax year.

Often times the actual method will result in a higher home office deduction, but the simplicity (no tracking receipts) and depreciation recapture are attractive elements and might make the standard deduction the more attractive option.  Looking through my clients I found the actual expenses were higher in almost every case, but it is worth a discussion.  It’s not every day the IRS gives you an extra choice.