TribLIVE

| Business

 
Larger text Larger text Smaller text Smaller text | Order Photo Reprints

Home-office tax break gets easier to compute

Email Newsletters

Click here to sign up for one of our email newsletters.

On the Grid

From the shale fields to the cooling towers, Trib Total Media covers the energy industry in Western Pennsylvania and beyond. For the latest news and views on gas, coal, electricity and more, check out On the Grid today.

'American Coyotes' Series

Traveling by Jeep, boat and foot, Tribune-Review investigative reporter Carl Prine and photojournalist Justin Merriman covered nearly 2,000 miles over two months along the border with Mexico to report on coyotes — the human traffickers who bring illegal immigrants into the United States. Most are Americans working for money and/or drugs. This series reports how their operations have a major impact on life for residents and the environment along the border — and beyond.

By The Record (Hackensack, N.j.)
Monday, Feb. 4, 2013, 12:01 a.m.
 

The Internal Revenue Service is offering people who work from home an easier way to deduct the cost of their home offices.

Under the new formula, home-based workers will be allowed to deduct $5 per square foot of office space, up to 300 square feet, for a total deduction limited to $1,500. The new option is available for the 2013 tax year, meaning for tax returns filed in 2014.

If they prefer, they could stick with the old way, which involves adding up all their housing expenses — mortgage interest, property taxes, insurance, electricity and so on — and deducting a percentage that's equal to the share of the home's space that is devoted to the office.

So if your home office —which must be used exclusively for work — takes up 10 percent of the space in your home, you could deduct an amount equal to 10 percent of the home-related costs.

The release of the new deduction formula coincides with an upsurge in home-based businesses since the last recession, one of the worst since the Great Depression. According to the American Community Survey compiled by the Census Bureau, 5.8 million, or 4.3 percent of the workforce, worked the majority of the week at home in 2010. This is an increase of about 1.6 million since 2000.

Park Ridge, N.J., accountant Thomas Braun predicted the streamlined option will be popular. “A lot of people are going to jump on this,” he said. “It's going to be very easy to determine. You're not going to have to worry about getting 12 months of bills together.”

With almost 3.4 million taxpayers claiming home-office deductions nationwide, the new option is expected to cut the paperwork burden on taxpayers by 1.6 million hours a year, according to the IRS.

Braun estimated that 10 percent to 15 percent of his clients take the deduction, which is available for the self-employed and for those who work for others, but at home.

“It's taken off in the past 10 years, no doubt about it,” he said. “Telecommuting is very popular.”

In addition, he said, many people who lost their jobs during the 2007-09 recession started home-based businesses. Typically, he said, his clients deduct from $500 to several thousand dollars, depending on the size of their home offices.

Psychotherapist Loren Gelberg-Goff, who sees patients in a 144-square-foot office in her River Edge, N.J., home, said she welcomes the idea of simplifying her paperwork.

“Every year, I go through my receipts to see what I paid (on housing) and give the total numbers to my accountant,” said Gelberg-Goff, who has had a home office for 25 years. Because her accountant does the calculation, she said, she doesn't know what the deduction is worth.

The new option, she said, “would probably save time,” though she said she'd have to check with her accountant to see if it makes financial sense.

Caryn Starr-Gates, who runs a marketing firm out of her Fair Lawn, N.J., colonial, said she'd be curious to see how the simplified deduction might work for her and her husband, Larry Gates, who operates a music recording studio out of the home's basement. As it stands, the two give their accountant their yearly household bills and let him figure out how to handle the home offices.

Subscribe today! Click here for our subscription offers.

 

 


Show commenting policy

Most-Read Business Headlines

  1. Facebook ready to test giant drone
  2. Cost-cutting at Kraft Heinz extends to refrigerator
  3. Home rental prices jumped again in June
  4. U.S. asks Supreme Court to reinstate convictions of portfolio managers who won on appeal
  5. Economy’s 2Q best since last year
  6. Muni bond funds stressed
  7. GNC to convert more stores to franchises as sales, profits slip
  8. Stocks bounce back from big losses to close relatively flat
  9. Kennametal expects to consolidate plants as it shrinks manufacturing in continuing streamlining; profit drops
  10. Post-Gazette offers voluntary buyouts in bid to avoid layoffs
  11. EPA ordered to ease limits on cross-border air pollution that involves Pennsylvania