Kentucky Startup Lawyer


New Tax Rules Re: Home-Office Deductions

The dreaded home-office deduction is about to get a little easier. The Internal Revenue Service announced last week that it will be introducing a simplified option for claiming the home-office deduction. Long considered a red flag for audits, the home-office deduction is used by home-based businesses and some other home-based workers to write off the expense of using part of the residence for work purposes.

Currently, the tax break often is passed out by many taxpayers because the calculations required to apply it are so complicated.  The current method requires taxpayers to file Form 8829, which involves often complex calculations factoring in not only the square footage of the home use for work, the property depreciation and other costs like utility bills and real estate taxes. Under the new rules, which reduce the paperwork and calculations needed to file the deduction, business owners will be able to claim $5 for every square foot of home office space, up to 300 square feet, for a maximum deduction of $1500. The new option will be available for the 2013 tax return season.

Some business owners will save more by sticking with the original form, which is subject to the $1500 cap.  This is especially the case for people with large offices or high utility bills. The only downside is that you have to spend the time to go through the calculations to determine your deduction.

This change is a big win for small business owners with home offices who often avoid filing for the deduction out of fear that an error on the form would trigger an audit. A recent survey by the national Association for the self-employed found that nearly 60% of the business owners are used home offices didn’t file for the deduction. The new simplified changes will likely increase the number of home-office deductions taken by business owners.


Nathan S. Fort, ESQ
Fort Phelps PLLC
415 E. Market Street, Suite 101
Louisville, KY 40202
Phone: (502) 509-3678
Fax: (888) 710-0379


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