In 2013, the IRS launched a new method for claiming a deduction for the work-from-home workforce. Find out if it’s right for you!
Technology has driven the sharp rise in the remote workers over the past decade. This rise has also hugely increased the amount of paperwork for all involved: the worker, the tax preparer and the IRS. Claiming the deduction for working from home means tracking expenses, keeping tons of receipts, and then doing some math to figure out just what percentage of those expenses went to the home and what went to the business.
The new method for claiming the home office tax deduction is simply this:
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Measure the square footage of your home office.
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Multiply it times $5.
Home Office Square Feet x $5 = Deduction
One thing to note though is that the deduction maxes out at $1,500. This may not be as financially advantageous as the other (old) method might be.
For example, if your home has a low square footage of 900 and your mortgage/rent is $2,900 and your home office space is 180 sqft, using the new more simple method would only equate to a $900 deduction. The old way would be a deduction of $6,960! The older style of deducting is more work and more paper trails, but this is a case of getting what you pay for in a way.
Now, if you have a ton of square feet and low mortgage/rent (good for you), it may make more sense to go with the simple method. The new method is also a great option for those out there that have not been tracking expenses and saving receipts.
Call us with us with any question you have about your tax situation!