Small business owners who work from home could get a break this tax season.
A new, simpler calculation — allowing taxpayers to deduct $5 per square foot of home office space up to 300 feet — could save taxpayers a combined 1.6 million hours a year in form filling time, according to the Internal Revenue Service.
Current restrictions to the home office deduction still apply — a home
office must be used regularly and exclusively for business, and the limit on the deduction amount is tied to a business’s income.
Those who work from home offices could deduct up to $1,500 from their home office tax calculation starting with their Tax Year 2013 return. Most tax payers will file these returns in early 2014.
The IRS is currently accepting comments on how to improve this option, which is part of a broader effort by the President’s Office of Information and Regulatory Affairs to reduce paperwork for individual taxpayers and small business owners.
Those who work from home offices often don’t claim their home-office tax deductions because of lengthy and confusing calculations, according to the Small Business Administration. But for the 52 percent of small business owners who work from home, this new method provides a “common-sense solution to a long-standing problem the self-employed community has faced for years,” said Kristie Arslan, president and chief executive of the National Association of the Self-Employed.
“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,” Arslan said.
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