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Taking the Home Office Deduction? Read This (Fox Business)
Instead of filling out the long and complicated form 8829 as in the past, taxpayers can now take a standard deduction, according to the IRS. The standard deduction is equal to the square footage of the home office multiplied by $5 for a maximum deduction of $1,500.
“This is the type of thing that makes the biggest difference for small businesses. They are taking complex legislation and a complex number of forms and making it a lot easier to deal with. It’s the best thing we could hope for,” says Keith Hall, president, CEO and National Tax Advisor for the National Association for the Self-Employed (NASE).
The longer form option is still available. Though form 8829 is only one page long, Hall says filers are told to “See instructions” 17 times. The IRS estimates that as many as 9 million people are eligible to take the home-office deduction.
While the simplified form may be preferable to some business owners, Hall says there may be benefits to filling out the longer form for others. Before immediately taking the easy way out, Hall suggests trying to do a rough calculation using the longer form.
“Do a quick calculation under both methods to see which one may yield the bigger deduction. If the long form seems to give a significantly larger deduction, then go through the effort of finding all receipts for your home utilities, mortgage interest, real estate taxes, and any other repairs or maintenance,” says Hall.
Especially if your home office is larger than 300 square feet – the size that would yield the maximum deduction using the simplified equation – the longer form could mean a greater deduction, he says. This is also true, he adds, if you have done significant work on your home in the past year.
He also says not to worry that taking the home-office deduction will trigger an audit.
“I don’t believe in red flags. If you don’t take a deduction, it’s like you’re paying the IRS not to audit your return. If you’re eligible, take it, because it helps you invest back into your business,” says Hall.
See the article online here