Many of us feel we can’t get away from work, even at home. The question for tax treatment is: Do our activities qualify for a home office deduction?
The requirements for a home office deduction are stringent. The work area must be exclusively used as either
- The taxpayer’s principal place of business, or
- A place of business used by patients, clients or customers of the taxpayer in the normal course of business, or
- In the case of a separate structure, in connection with the taxpayer’s business.
In addition, employees, as opposed to self-employed taxpayers must be working at home for their employer’s convenience.
The new rules apply once requirements for the deduction are met. In past years, taxpayers had to calculate the percentage of the home used for business, and then apply the percentage to various actual home expenses. Beginning in 2013, the IRS is offering a new safe harbor. The new calculation is $5 times the square footage of the area used for business, not to exceed 300 square feet. The safe harbor calculation is subject to the same income limitations as the actual method. However, the unused portion can’t be carried forward. In addition, employees can’t use the safe harbor method if they receive any reimbursements or allowances from their employers.
Taxpayers still have to prove they qualify for a home office deduction, but once they determine they’re qualified, the new safe-harbor may make calculating the deduction easier.
Need help determining if you qualify for the home office tax deduction? Our personal tax services group can help you determine the answer and optimize that deduction for each situation. Contact us at 614.545.9100 learn more.