I cook at home. A few times on my birthday my wife would present me with a cooking class at Laguna Beach, California. At one of these events, I recall the chef asking us to separate the whites from the yolks of several eggs. A couple of people cracked the eggs in half and tossed the yolk back and forth until all of the whites had fallen into the bowl leaving the yolks in the shells. This of course took a couple of minutes for each egg.
After watching, the chef said, “No, I’ll show you how to do this quickly.” He then cracked an egg in his hand letting the whites run through his fingers into a bowl for about five seconds and threw the yolk into another bowl. “That’s how it is done,” he scowled. “Simplified!”
If you were ever audited for taking a home in office deduction, you my have found some broken shells in your deduction. I recall an audit of a screenwriter. The auditor challenged me on the details of the deduction. I told her the screen writer wrote a successful Disney cartoon from that office. That auditor said her kids loved the movie, and allowed the deduction.
If you want to simplify your home office deduction, look at this safe harbor from the IRS web site:
The new optional deduction, capped at $1,500 per year based on $5 a square foot for up to 300 square feet, will reduce the paperwork and record keeping burden on small businesses by an estimated 1.6 million hours annually.
“This is a common-sense rule to provide taxpayers an easier way to calculate and claim the home office deduction,” said Acting IRS Commissioner Steven T. Miller. “The IRS continues to look for similar ways to combat complexity and encourages people to look at this option as they consider tax planning in 2013.”
The new option provides eligible taxpayers an easier path to claiming the home office deduction. Currently, they are generally required to fill out a 43-line form (Form 8829) often with complex calculations of allocated expenses, depreciation and carryovers of unused deductions. Taxpayers claiming the optional deduction will complete a significantly simplified form.
Though homeowners using the new option cannot depreciate the portion of their home used in a trade or business, they can claim allowable mortgage interest, real estate taxes and casualty losses on the home as itemized deductions on Schedule A. These deductions need not be allocated between personal and business use, as is required under the regular method.
Business expenses unrelated to the home, such as advertising, supplies and wages paid to employees are still fully deductible.
Current restrictions on the home office deduction, such as the requirement that a home office must be used regularly and exclusively for business and the limit tied to the income derived from the particular business, still apply under the new option.
The new simplified option is available starting with the 2013 return most taxpayers file early in 2014.
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An inneeligltt point of view, well expressed! Thanks!
Thanks for writing, Willie. Check out our podcast on Itunes “Improv-ing Business”
The LA CPA