The IRS has just published a new option for business owners who operate out of their homes. In the past it was formula based and had to include totals for electricity, insurance, mortgage interest and even depreciation.
For 2013, an individual who operates their business out of their home, and thus is where their office is located, can now use a figure of $5 a square foot, with a maximum 300 square feet ($1,500 max deduction). No other record keeping is necessary, but you also can't claim any other expenses. If you file a Schedule A (itemized deductions) you can also claim mortgage interest and taxes on your personal return.
Of course you still have to abide by the general rules of home office deduction which means it has to be a dedicated area (not your dining room table on Fridays) and must be your principal place of business. There are a few other requirements. You can also continue to use the old system for claiming deduction if you wish.
Be sure if you are working out of your home and allowed to take this deduction that you do so. It is always nice when the IRS actually makes our life easier.
Tom
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