Tax season is fast approaching, and those of you with home offices know how hard it is to calculate your residence-based business deductions under current tax laws.
But there’s good news: After acknowledging how “complex and burdensome” the necessary recordkeeping was. The IRS just recently amended them to add an easy to calculate safe harbor method. Here’s what you need to know:
Comparison of methods
Simplified Option Regular Method Deduction for home office use of a portion of a residence allowed only if that portion is exclusively used on a regular basis for business purposes Same Allowable square footage of home use for business (not to exceed 300 square feet) Percentage of home used for business Standard $5 per square foot used to determine home business deduction Actual expenses determined and records maintained Home-related itemized deductions claimed in full on Schedule A Home-related itemized deductions apportioned between Schedule A and business schedule (Sch. C or Sch. F) No depreciation deduction Depreciation deduction for portion of home used for business No recapture of depreciation upon sale of home Recapture of depreciation on gain upon sale of home Deduction cannot exceed gross income from business use of home less business expenses Same Amount in excess of gross income limitation may not be carried over Amount in excess of gross income limitation may be carried over Loss carryover from use of regular method in prior year may not be claimed Loss carryover from use of regular method in prior year may be claimed if gross income test is met in current year
Welcome to Stanek Tax Services where our Motto is, "Don't Panic, Call Stanek!"