Home-office tax break gets easier to compute
By The Record (Hackensack N.j.)
Published: 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.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- More women seize opportunities to start businesses
- Meat prices drain barbecue budgets
- Pa. unemployment rate falls to lowest since 2008; 12,000 more enter workforce
- Salad dressing company manages growth
- Lawsuit challenges Hollywood standard of unpaid internships
- Squeezed by competition, Chobani to expand offerings
- Investment in Western Pa. startups reaches 5-year high
- Programs help to nudge unemployment among veterans downward
- Retailers tailor store experience to phones
- Emboldened by Italy move, QVC to expand into France
- Chocolate prices expected to soar as ingredients grow more expensive