In the midst of the debt ceiling gloom, the Internal Revenue Service provided a piece of good news on Tuesday for owners of many home-based businesses: simplified rules for figuring their deductions on home offices.
Currently, taxpayers must submit a 43-line form, often with complex calculations of allocated expenses, depreciation and carryovers of unused deductions. Taxpayers claiming the optional deduction will complete a significantly simplified form.
The new optional deduction, effective for the 2013 tax year, should reduce the record-keeping burden of small businesses by 1.6 million hours annually, the IRS said in a release.
Mike Brinker, a partner in the tax department of McGowen, Hurst, Clark & Smith P.C. in West Des Moines, said the simplification could encourage more of his small business clients to claim the deduction when they file their 2013 tax returns next year.
"I think it's a good thing in terms of tax simplification," he said. "A lot of people gave up on the deduction because it just wasn't worth their time."
Though homeowners using the new option cannot depreciate the portion of their home used in a trade or business, the IRS said, they can claim allowable mortgage interest, real estate taxes and casualty losses on the home as itemized deductions on Schedule A. These deductions need not be allocated between personal and business use, as is required under the regular method.
Further details on the new option can be found in Revenue Procedure 2013-13, posted on IRS.gov.