Home Business Taxes: New Home Office Deduction Rules

Starting in tax year 2013, there are new rules for taking the home office deduction when you figure your taxes.

If you have been using space in your home as an office for business purposes, you might have a new, easier option for taking the home office tax deduction. Starting this year, in 2013, it will be possible to take a flat-rate deduction for your home office.

It’s important to note that this applies to tax year 2013, so you can’t use the new rules as you figure your 2012 taxes.

Home Sweet Studio

What are the New Rules?

Basically, you now have two options when it comes to claiming a home office deduction on your taxes. You can keep figuring the deduction the old way, or you can take a deduction of $5 per square foot — up to $1,500.

Your situation will determine which method is best for you. In my case, I have a rather small home office space: A portion of one of the rooms in my home. As a result, the $5 per square foot is likely to mean a bigger deduction than I have been getting so far.

On the other hand, if you have a relatively large home office space, you might be better off figuring your deduction the old way, particularly if you normally see a deduction of more than $1,500. The cap on the new way for figuring the home office deduction limits its usefulness for those with larger expenses.

The new method for figuring the home office deduction includes utilities as well as the cost you pay for mortgage/rent. It streamlines the process for those who have been reluctant to go through the process of figuring the deduction in the past.

It’s important to note, however, that the definition of a home office for tax deduction purposes hasn’t changed. Even under the new rules, the home office deduction can only be taken on areas that are used exclusively for business.

photo by: geishaboy500

Written by Miranda Marquit

Miranda Marquit is a freelance writer and professional blogger, specializing in personal finance, small business, and investing topics. She writes for a number of financial web sites and blogs, and has been featured in numerous media. Read about life as a freelancer at MirandaMarquit.com and in her book Confessions of a Professional Blogger.

3 Responses to Home Business Taxes: New Home Office Deduction Rules

  1. Good news! I’m for easier when it comes to taxes. Tired of
    the old routine of measure it with a micrometer, mark it with
    a crayon, then chop it with an ax, which ironically seems all
    to similar when it comes to the brain damage of figuring taxes. The deduction you get sometimes doesn’t seem worth
    the effort you have to go through to get it.

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