Can I Claim the Home Office Deduction?
July 10, 2014
Many individual taxpayers involved in real estate investment or development maintain a home office. But, even though the IRS recently made it easier to claim the home office deduction, you may still not qualify for it.
New safe harbor
The IRS now offers a safe harbor for claiming a tax deduction if you use a portion of your home for business. Previously, the only way to claim the deduction was to track all actual costs related to your use of the home space and complete Form 8829. This new, simplified option should reduce your paperwork and record-keeping burden.
The safe harbor allows you to claim a standard deduction of $5 per square foot for up to 300 square feet — a cap of $1,500 per year. Although you can’t depreciate the portion of your home that’s used as an office — as you can under the regular Form 8829 method — you can claim allowable mortgage interest, real estate taxes and casualty losses in full as itemized deductions on Schedule A, without needing to apportion them.
Two eligibility requirements
Regardless of which method you elect for a given tax year, you need to satisfy two requirements to qualify for the deduction:
You can also claim the deduction for a separate freestanding structure, such as a garage, if you use it exclusively and regularly for your business — even if it’s not your principal place of business or the only place you meet clients.
Choosing the best course
Both the new safe harbor and regular method are subject to additional restrictions and rules, and they come with the potential for unexpected tax effects down the road. For more information, contact Mark Abrams, Sean Taylor or Tim Agnew in our Real Estate Niche at 404-874-6244.
If you have any questions and would like to connect with a team member please call 404-874-6244 or contact an advisor below.CONTACT AN ADVISOR
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