Taxpayers who work out of their homes have found it difficult previously to calculate their home office deduction for the Internal Revenue Service. In addition, the deduction is notorious for raising red-flags with the tax agency. However, the Internal Revenue Service says that process will be simplified and less troublesome when filing taxes next season.
Looking at a deduction for your home
The Internal Revenue Service said Tuesday, January 15 that it will be simplifying the process for entrepreneurs and small company to deduct rooms in their homes as a place of business this year.
In 2010, the most recent years statistics are available for, 3.4 million Americans claimed deductions for home offices, according to the IRS.
Section 280A of the tax code allows taxpayers to deduct expenditures for an office in a private home if the room is: "The principal place of business of a trade or business, as a place where you meet with patients, clients, or customers in the normal course of your business, or your work as an employee, but only if the use of the home office is for the benefit of your employer."
Once cumbersome procedure simplified
Taxpayers had to fill out the 43-line Form 8829 to determine what part of the home is actually deducted for the business. This was really complicated and took a lot of work.
In 2014, it will be much less with $5 per square foot of room and up to 300 square feet.
Smaller businesses and entrepreneurs will save millions of hours in paperwork by making the change, which the IRS is happy about.
A lot of happy campers
The change has gotten a lot of good press, specifically from the National Association for the Self-Employed.
"This is terrific news for the 52 percent of all small business that work from home, who fight every day to meet their bottom lines while continuing to contribute to the economy," said Kristie Arslan, who heads the group. "The previous calculation for the deduction was cumbersome and time consuming for America's smallest business and year after year hard-earned dollars were left on the table."
The first returns to incorporate the change will be 2013 returns filed in 2014.
Looking at a deduction for your home
The Internal Revenue Service said Tuesday, January 15 that it will be simplifying the process for entrepreneurs and small company to deduct rooms in their homes as a place of business this year.
In 2010, the most recent years statistics are available for, 3.4 million Americans claimed deductions for home offices, according to the IRS.
Section 280A of the tax code allows taxpayers to deduct expenditures for an office in a private home if the room is: "The principal place of business of a trade or business, as a place where you meet with patients, clients, or customers in the normal course of your business, or your work as an employee, but only if the use of the home office is for the benefit of your employer."
Once cumbersome procedure simplified
Taxpayers had to fill out the 43-line Form 8829 to determine what part of the home is actually deducted for the business. This was really complicated and took a lot of work.
In 2014, it will be much less with $5 per square foot of room and up to 300 square feet.
Smaller businesses and entrepreneurs will save millions of hours in paperwork by making the change, which the IRS is happy about.
A lot of happy campers
The change has gotten a lot of good press, specifically from the National Association for the Self-Employed.
"This is terrific news for the 52 percent of all small business that work from home, who fight every day to meet their bottom lines while continuing to contribute to the economy," said Kristie Arslan, who heads the group. "The previous calculation for the deduction was cumbersome and time consuming for America's smallest business and year after year hard-earned dollars were left on the table."
The first returns to incorporate the change will be 2013 returns filed in 2014.
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