Home office expenses can be an overlooked source of valuable business deductions.
Many business owners don’t claim them because they fear (incorrectly) that home offices are an audit “red flag,” or because the recordkeeping is a pain. But under the IRS “Safe Harbor” method, that may make home office deductions more accessible.
IRS Revenue Procedure 2013-13 let’s you deduct a flat rate of $5 per square foot, for up to 300 feet of qualifying office space.
You’ll still deduct your mortgage interest and property tax attributable to the space on Schedule A as usual. But you won’t have to calculate any actual expense or depreciation deduction for the space.
On the downside, if your simplified home office deduction reduces your income below zero, you can’t carry if forward to future years, as you can with the regular deduction.
You can determine year-by-year which home office deduction method to use. You don’t have to elect one and lock yourself into it for the future.
Do you have a space in your home that you use “regularly and exclusively” for business, but don’t specifically deduct it as a home office?
To see if the Safe Harbor makes sense for you, call us at 888-627-2262 to Book your free Mini Tax Planning Session.