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January 15, 2013

IRS announced a simplified method to claim a Home Office Deduction, starting in 2013

A new optional deduction will reduce the paperwork and recordkeeping burden on small businesses.  The deduction is based on $5 a square foot for up to 300 square feet.

Current restrictions on the home office deduction still apply.  That includes the requirement to use the home office regularly and exclusively for business and the limit to the income from the business.

This method eliminates the need to file form 8829.  A new simplified form will be provided to claim the home office deduction under the new rule.

The deduction for depreciation of the portion of the home  used in a trade or business will not be permitted if
the simplified option is used.  Allowable mortgage interest, real estate tax and casualty losses on the home can
be claimed as itemized deduction on Schedule A.  these deductions need not  be allocated between personal
and business use.

Business expenses unrelated to the home such as advertising, supplies and wages paid to employees will still be fully deductible.

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