THE RETURN OF A HOME OFFICE STANDARD DEDUCTION

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Here is something that is new for 2013 returns - “Helping Small Business Owners and Home-Based Employees Claim the Home Office Tax Deduction”,explained by Deputy Secretary Neal S. Wolin and SBA Administrator Karen G.Mills. 
“The new option allowsqualified taxpayers to deduct annually $5 per square foot of home office spaceon up to 300 square feet, for as much as $1,500 in deductions.  To take advantage of the new option,taxpayers will complete a much simpler version of the current 43-line form.
The newoption for the home office deduction will be available starting with the TaxYear 2013 return, which most taxpayers file early in 2014.
Currentrestrictions on claiming the home office deduction, such as the requirementthat a home office be used regularly and exclusively for business and the limiton the amount of the deduction tied to income derived from the particularbusiness, still apply under the new option.”
Be aware that this option is NOT available for 2012 returns.
I commented on this when the idea was first proposed by NationalTaxpayer Advocate Nina Olsen a few years ago in my post “A Home Office Standard Deduction”.
My thoughts on this new option are along the same lines as thoseof Russ Fox, as outlined in his TAXABLE TALK post “Is A Simplified Home Office Deduction Better?” –
I lookedat all of my clients who filed this form, and the simplified procedure wouldhave cost every one of them money. Perhaps that’s because of my client base,but I don’t think so. Most taxpayers taking the home office deduction do keepgood records, so the recordkeeping isn’t that big of a deal. After all, theseare small business owners who have to keep good records anyway (or are supposedto). The reality is that $5 per square foot understates the cost of most homeoffices, especially when factoring in depreciation.
Simple in this case does not necessarily mean better.
As this is an option, taxpayers who qualify for a home officededuction in 2013 should calculate the deduction using both actual expenses andthe optional method and choose the option that provides the bigger deduction.
One question – how will using the standard deduction optionaffect the Schedule A deduction for real estate taxes and mortgage interest(since these items are a component of the home office deduction)?
TTFN