For millions of Americans, “housework” has acquired a new meaning. Instead of picking up a mop, they grab a laptop and headphones and settle in at a desk.
Here’s the good news: People who set aside a portion of their home for work, and don’t use it for other purposes, may pocket more of their pay with a tax deduction that’s now easier to claim.
Starting in tax year 2013 (filed April 2014), anyone who regularly works at home can deduct $5 per square foot of business space, up to 300 square feet.
The deduction is available to anyone who works at home regularly, even just a couple of days per week, whether they’re self-employed or not. “But your employer can’t make an office available to you, you must be required to work from home,” explains Linda Forman, past vice president of the Illinois CPA Society.
Currently, some 3.4 million taxpayers claim a home office deduction, calculated by tallying up all their home expenses, such as mortgage payments (or annual rent) and utility bills, and then deducting the share of those expenses that their exclusive office space takes up. That formula will still be available, alongside the new, simpler $5 per square foot calculation.
“For some people, say someone in a two bedroom apartment who uses one-third of the space for his business, it could be worthwhile to use the older deduction,” Forman says.
But others, particularly workers whose income is in under $75,000 or so, may benefit by portioning off a space at home for work use only, Forman says.
Sometimes, higher earners opt not to take the deduction because too many write-offs can prompt an “alternative minimum tax” which pushes up a tax bill.
But a reluctance to keep records of expenses does hold back some home-based workers, and the simplicity of the new method may prompt them to take the break, Forman says.