Remember Your Simplified Home Office Deduction
Beginning this year, a taxpayer is allowed to use a simplified home office deduction. In years past, a taxpayer was required to calculate this deduction based upon the office square footage divided by the home’s total square footage. This percentage was then multiplied against the following items:
- Interest
- Real estate taxes
- Insurance
- Repairs
- Other home costs
- Or Rent
The sum of these numbers plus a representative share of the depreciation on the home office was the calculated home office deduction.
However, for 2013, the IRS now allows a simplified home office deduction and they just released publication 587 which gives you the details on how to calculate the deduction. In brief, the deduction is simply $5 times your total office space used in the home. If you choose to use the simplified method, you are not locked into using it in the future. You can switch from one to the other each year. If you have carry over home office deductions, these are not deductible until you use the regular method. The limit on the simplified method is 300 square feet times $5 or $1,500.
For many farmers who have a home office in their personal residence, this may be a much simpler method and in some cases, it will yield a greater deduction.
Paul Neiffer, CPA
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
Comments are closed.