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US Accountants Comment On Home Office Deduction
Source:
tax-news.com
- May 17, 2013
by Mike Godfrey, Tax-News.com, Washington
17 May 2013
The American Institute of Certified Public Accountants (AICPA) has recommended, in a letter to the United States Internal Revenue Service (IRS), that the agency should re-evaluate certain provisions of its optional safe harbor method for the home office deduction, as proposed in a Revenue Procedure at the beginning of this year.
The IRS created the safe harbor method to simplify the home office deduction for many individual taxpayers, owners of home-based businesses and some home-based employees. It will be applicable to taxable years beginning on or after January 1, 2013, but the IRS has also solicited feedback on the optional method "to improve it for tax year 2014 and later years."
A taxpayer may qualify to deduct expenses for the business use of his or her home, if part of the home is exclusively and regularly used for business purposes. The home office deduction may include part of certain costs that the taxpayer paid for having a home. For example, a part of the rent or allowable mortgage interest, real estate taxes and utility payments could qualify. The amount of the deduction usually depends on the percentage of the home used for business.
The safe harbor method would allow taxpayers to deduct home office expense at USD5 per square foot for a maximum of 300 square feet of qualified home office space used, for a maximum yearly deduction of USD1,500. It is hoped that it will reduce the paperwork and record keeping burden on small businesses by an estimated 1.6m hours annually.
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Category: General Business
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