If You Work From Home, Your Taxes Just Got Easier

IMAGE: ISTOCKPHOTO, DAVE SUCSY PHOTOGRAPHY
IMAGE: ISTOCKPHOTO, DAVE SUCSY PHOTOGRAPHY

If you wanted to take the home office deduction on your taxes in years past, you’d need a measuring tape, calculator, and then a year’s worth of bills for all your home expenses. With the 2013 tax return, the IRS has introduced a new “no-doc” simplified version of the home office deduction.

According to the IRS, this simplified option will save small businesses 1.6 million hours annually by reducing paperwork and recordkeeping. But just because the new option is easier, does it mean it’s better? Here, we’ll break down the two methods for calculating the home office deduction so you can decide what works for you.

Introducing the simplified method

With the traditional method, you add up your year’s expenses: mortgage/rent, insurance, real estate taxes, and utilities. Then you multiply that figure by the percentage of your house that’s dedicated as the home office. With this method, you also need to fill out a 43-line form (Form 8829).

If you want to use the new simplified method, all you have to do is measure your home office and then multiply the square footage by $5. That’s your deduction. Keep in mind that your home office space needs to be used exclusively and regularly for your home-based business. And, your deduction with the simplified option caps out at $1,500.

You can think of the new home office option like taking the standard mileage rate for your business car deduction. With the standard mileage, you just add up the number of miles driven for business purposes and multiply it by the IRS’ standard rate for the year. Alternatively, you could choose to add up all your actual expenses (like maintenance, gas, car insurance, etc.) – which is obviously a much more cumbersome and receipt-intensive process.

Click here to read more

Source: Mashable.com | NELLIE AKALP

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s