If you’re self-employed and your office is in your home, then you should know about a new home office deduction calculation. To take the deduction, the Internal Revenue Service (IRS) requires your home office be your principal place of business – and you must use it regularly and exclusively as such. If you meet the requirements, you can deduct a portion of your home’s expenses, including insurance, utilities and rent. For 2013, there is a new method of calculating your home office deduction.

Starting with 2013 tax returns, you will be able to skip some of the more complex calculations currently required for the deduction and simply write off $5 per square foot of your home office, up to $1,500 or 300 square feet. Don’t rejoice too quickly: for many taxpayers, the $1,500 cap will be less than what they would have claimed by completing the lengthier form. Homeowners can claim allowable mortgage interest, real estate taxes and casualty losses on the home as itemized deductions on Schedule A. These deductions need not be allocated between personal and business use, as is required under the regular method.

July 2, 2013 12:00 am