IRS rolls out a safe harbor home office deduction

The IRS has issue Revenue Procedure 2013-13, which introduces a new safe harbor home office deduction for those taxpayers who otherwise qualify for the deduction.  The prescribed deduction $5.00 per square foot, up to 300 square feet (thus, an optional deduction of up to $1,500).  The $5.00 is not indexed for inflation, though the Rev. Proc. indicates that the IRS could update the rate from time to time.  The optional safe harbor deduction will be available for tax years beginning in 2013.

What happens to the prorated amount of mortgage interest and real estate taxes that you have been allocating to Form 8829?  You’ll get to deduct those in full on Schedule A without making any adjustment to the safe harbor deduction.

The Rev. Proc. does not change one’s eligibility for the deduction – therefore, you must still meet the Section 280A requirements to claim the deduction.

Why now?  The IRS estimates that use of the safe harbor deduction will reduce the paperwork and recordkeeping burden on taxpayers by about 1.6 billion hours annually.  I’ve always taken the Service’s paperwork burden estimates with a grain of salt, but I do believe that this will be beneficial for a lot of taxpayers who have been previously intimidated by the deduction.


About jgrahamcpa

CPA. Record label owner (Two Sheds Music). Music/sports junkie. Lebanese food enthusiast. Unhinged Braves / Crimson Tide fan.
This entry was posted in Business advisory, Taxes. Bookmark the permalink.

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