Claiming a Home-Office Deduction on Your Tax Return? Believe It or Not… It Just Got Easier!

The IRS is not known for making things easy on taxpayers, as we all know. Between the complex tax forms they require taxpayers to complete, excessive wait times for taxpayers attempting to get a simple question answered over the phone, and the laundry list of documentation that must be supplied, it’s no surprise that filing tax returns is a task that most Americans dread.

But this year, the IRS is making things easier—at least in one area. They have streamlined the process of claiming a home-office deduction, which should make the process less complex for business owners and the self-employed. A recent article explains:

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.

This is good news for taxpayers who plan to claim a home-office deduction. However, as noted in the excerpt above, it is a good practice to compare the deduction amount available under both methods in order to determine which will save you more money. Also, as we have noted previously, be careful only to claim this deduction if you are legitimately eligible for it. Some believe that claiming a home-office deduction raises the likelihood of being selected for an IRS audit, which is something that no taxpayer wants to experience.

If you have questions or need assistance with your tax return, we can help. In addition, should you find yourself in the midst of an IRS dispute, our team can negotiate with the IRS on your behalf. Please contact us today if you’d like to learn more!

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