For millions of small-business owners and freelancers who work from home, it just got easier to get a tax break for home office space.
The Internal Revenue Service today said it was simplifying the home-office deduction used by more than 3 million business owners and home-based workers.
The Internal Revenue Service today announced a new optional deduction, which is capped at $1,500 per year based on $5 a square foot for up to 300 square feet. The IRS said the deduction would eliminate paperwork and record keeping burdens on small businesses by 1.6 million hours annually.
Nearly 3.4 million taxpayers claimed deductions for business use of a home in tax year 2010, the most recent available data. Currently, homeowners are generally required to fill out Form 882 which is a complex set of calculations and deductions. Under the new option, which will be available starting with the 2013 return, taxpayers will complete a simplified form.
The IRS guidelines state you must regularly use part of your home exclusively for business purposes, like using a spare bedroom to run an online business or the playroom for daycare. The deduction also allows workers who use their home to do work for their employer — say meeting clients on a regular basis — to take a home office deduction.
“This is terrific news for the 52% 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, President and CEO of NASE. “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.”
SOURCE:Â Treasury.gov