There's a Simpler Home Office Deduction in 2013
Also, if your home office expenses exceed your gross income less business expenses, the new method, unlike the old, forbids you to carry over the excess to future years. If you switch to the safe harbor method, you also lose any prior year's carryover.
An added wrinkle: If you switch later to the old deduction method, you must account for the prior depreciation although only as basis for depreciation. That means, according to the IRS, you multiply the cost or other basis of the property by the percentage of business/investment use and then subtract any credits and deductions allocable to the property.
Rather than simplify, this complicates the depreciation calculation: You must skip the years when depreciation isn't charged to determine basis for the current year, but account for those years when determining which year's depreciation to deduct.
Finally, once you've filed with one choice, you cannot amend the return to change the method of deduction. If you have more than one home and you intend to take the home office deduction for offices in each home, you are also limited to using the safe harbor for only one of the offices in any one year.You're not required to use the safe harbor rule for any of the offices -- a choice some will clearly make despite this IRS stab at simplification. -- By Jim Blankenship, an an independent, fee-only financial planner at Blankenship Financial Planning in New Berlin, Ill., and author of An IRA Owner's Manual and A Social Security Owner's Manual. His blog is Getting Your Financial Ducks In A Row, where he writes regularly about taxes, retirement savings and Social Security. AdviceIQ is a network of financial advisors that writes insightful articles for the public about investing and wealth management. All articles are edited by AdviceIQ's editor in chief, Larry Light. AdviceIQ certifies that all its advisors have no regulatory infractions. To subscribe to AdviceIQ's RSS feed for personal finance articles written by financial advisors and AdviceIQ editors,
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV