Simplified Home Office Deduction TY 2013

[Guest Taxed]

Revenue Procedure 2013-13,

Check this out, IRS will allow a max $1500 deduction without detailed recordkeeping for TY 2013. I think this will help many professionals who do consulting work out of their home and can usually deduct the big ticket expense (taxes and mortgage interest) on Sch. A.

[taxtrio]

Sounds great to me... just got the notice from IRS..

5.00 per sq ft up to 300 sq feet of OIH. but for 2013 not 2012... too bad we cannot use it now!

taxtrio

[joanmcq]

I wouldn't use a standard OIH deduction in Taxed's situation; the interest and taxes reduces SE tax, unless this isn't an issue. I'd use it if they didn't have interest & taxes, perhaps from a paid for home. If they rent, rent is often a big part of OIH. I'd use it if the office is really really small or just a small area to store goods.

[mcb39]

I just add a 200 sf addition to my home office and now they come along with this. I wasn't able to tell from the release whether it would be an either/or or just the straight deduction. Property tax, utilities and insurance are the biggies for me.

[joanmcq]

I'm sure its an either/or. There's been talk about a simplified OIH deduction for a few years now. Since I may be converting a third room to home office, I'll be pissed if it's limited too.

[Guest Taxed]

If you want to be really analytical you have to run it both ways and see what makes financial sense. I have many retired folks that consult and use a spare bedroom as an office. Basically the $1500 deduction will reduce their net profts significantly that Se is not going to be a major issue. However the fact that they don't have to keep 12 months of utility, repair bills would be ok with them.

[SCL]

i think the $1500 max allowance understates the actual deduction available if taken on the office in home form.

[Guest Taxed]

Perhaps, so we will have to look at it both ways to see what makes financial sense. I do like the option that many taxpayers who do small side jobs as an independent contractor will be able to use it without detailed recordkeeping requirements. My 2 Mary Kay ladies come to mind!

[JohnH]

But after the OIH deduction is simplified, will they still be able to deduct food and vet bills for their "security cat" who guards their inventory?

[Eric]

But after the OIH deduction is simplified, will they still be able to deduct food and vet bills for their "security cat" who guards their inventory?

Ooh, that's good stuff. I better start taking notes.

[RitaB]

But after the OIH deduction is simplified, will they still be able to deduct food and vet bills for their "security cat" who guards their inventory?

Pawsibly.

[JohnH]

Purrfect reply.

[RitaB]

But after the OIH deduction is simplified, will they still be able to deduct food and vet bills for their "security cat" who guards their inventory?

It will probably have a few reasonable and easily verified requirements, like the cat has to have expended two of the past five lives in the line of duty and be a full time student at an accredited obedience school. Probably attach coroner's reports to Form 8453. Piece of cake, much like EIC has been.

[jainen]

>>reasonable and easily verified requirements<<

Because it can be used for recreational purposes, a cat is listed property. No deduction allowed unless you keep a contemporaneous log book of time spent playing with a string.

[Lion EA]

I just paid $150 to buy my "kids" a refrigerator as a Christmas present to keep their home-made cat food. They own a bakery/coffee shop/restaurant and need to keep rodents out of their flour bin. I prepare their partnership tax return. May I deduct $150 as a business expense on my Schedule C?!

[mcb39]

Does that fall under the category of "gifts to clients"? Generally I don't charge my kids to prepare their tax returns. No income, no expense.

[GeneInAlabama]

>>Generally I don't charge my kids to prepare their tax returns. No income, no expense.<<

Why not? Doesn't that come under the same category of deducting loss of rent for the months rental property is not rented?

[jainen]

Sounds like we're all ready for tax season--at least we've got healthy attitudes!

[Margaret CPA in OH]

GeneInAlabama, I forgot all about that one! I have to amend last year's return now. Thanks!

[Guest Taxed]

Does that fall under the category of "gifts to clients"? Generally I don't charge my kids to prepare their tax returns. No income, no expense.

As long it does not exceed $25! Lion should have put that fridge in her office to keep soda for clients and then she could do a sec 179!

[Lion EA]

Then my kids would have to come visit me to use their frig! I like that idea.

[mcb39]

I thought about the $25 limitation on gifts to clients too. Actually, when I prepare my kids' returns, I still deduct the paper, toner, etc that I use as part of the whole. So...........the kids are making me lose money. But, they do come in handy when I need a desk moved or blinds hung. (Anyhow, Lion was pulling our chains......I think!)

[Lion EA]

Yes, before our clients try to suck us into their claims!

[jainen]

>>an independent contractor will be able to use it without detailed recordkeeping<<

You mean cleaning and repair receipts? That's usually about all there is besides utility bills, 1098, and tax bills. The real benefit accrues to the IRS, which now has a simplified audit for one of the biggest red flags.