Office in the Home Tax Deduction – New Announcement 2013
IRS has a simplified option that many owners of home-based businesses and some home-based workers may use to figure their deductions for the business use of their homes. And it is about time!
In tax year 2010, the most recent year for which figures are available, nearly 3.4 million taxpayers claimed deductions for business use of a home (commonly referred to as the home office deduction).  This is also an area that IRS tends to audit a lot because of the widespread abuse for the office in the home deduction.
The new optional deduction.
The new optional deduction is capped at $1,500 per year based on $5 a square foot for up to 300 square feet, will reduce the paperwork and record keeping burden on small businesses by an estimated 1.6 million hours annually. iI will also cut down on the number of audits that IRS will conduct for the office in the home deduction.
The new option provides eligible taxpayers an easier path to claiming the home office deduction.
They are generally required to fill out a 43-line form (Form 8829) often with complex calculations of allocated expenses, depreciation and carryovers of unused deductions. Taxpayers claiming the optional deduction will complete a significantly simplified form.
Though homeowners using the new option cannot depreciate the portion of their home used in a trade or business, they can claim allowable mortgage interest, real estate taxes and casualty losses on the home as itemized deductions on Schedule A.
These tax  deductions need not be allocated between personal and business use, as is required under the regular method.
Also, business expenses unrelated to the home, such as advertising, supplies and wages paid to employees are still fully deductible.
Current Restrictions
Current restrictions on the home office deduction such as the requirement that a home office must be used regularly and exclusively for business and the limit tied to the income derived from the particular business, still apply under the new option.
The new option.
The new simplified option is available starting with the 2013 return most taxpayers file early in 2014.
Further details on the new option can be found in Revenue Procedure 2013-13, posted today on IRS.gov. Revenue Procedure 2013-13 is effective for taxable years beginning on or after January 1, 2013, and the IRS welcomes public comment on this new option to improve it for tax year 2014 and later years.