Posted on 17 January 2013.
Editors note: This post is jointly authored by Treasury Deputy Secretary Neal S. Wolin and SBA Administrator Karen G. Mills. It was originally posted on Treasury's blog.
Today, many taxpayers who qualify for the home office tax deduction are not claiming it. The reasons often cited are that businesses and filers do not fully understand the provisions or find it too complicated to calculate the amount.
That is about to change.
As part of ongoing efforts by the Administration to reduce paperwork burdens, the Internal Revenue Service (IRS) announced today that it is providing a new, simpler option for calculating the home office tax deduction, allowing small business owners and employees who work from home and who maintain a qualifying home office to deduct up to $ 1,500 per year.
The IRS also expects taxpayers to save more than 1.6 million hours per year in tax preparation time from this simpler calculation method.
The new option allows qualified taxpayers to deduct annually $ 5 per square foot of home office space on up to 300 square feet, for as much as $ 1,500 in deductions. To take advantage of the new option, taxpayers will complete a much simpler version of the current 43-line form.
The announcement builds on the President’s commitment to streamline and simplify the tax code for small businesses and to reduce the burden for tax compliance. It is part of broader efforts to make interacting with the federal government easier and more efficient for businesses of all sizes.
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