Working from home can help entrepreneurs shave valuable time off commuting and other office tasks, time that can then be repurposed to count toward more productive activities. But working from home can do more than save you time, it can save money.
The U.S. Internal Revenue Service (IRS) maintains a tax deduction that allows small-business owners to deduct savings if they work from home. However, the agency said there has been a minimal number of claims to the deduction recently, meaning many entrepreneurs are leaving money on the kitchen table.
Listen up, if you want to save as much money as you can, it’s time to wise up and take advantage of a big opportunity through the tax code.
There are no more excuses not to act, especially after Income.com has learned the IRS simplified the calculation methods for the home office tax deduction. This means its easier for entrepreneurs to cash in on sleeping in.
One equation equals big savings
Previously, the IRS had made entrepreneurs jump through a series of algebraic hoops to get to the substance of savings through the home office tax deduction. These major savings came in the form of a 43-line document entailing myriad computations and permutations. The mathematically dense nature of the form can be seen as one of the main reasons just 3.4 million small-business owners claimed the deduction in tax year 201, when the number should be more, experts say.
But the IRS has revamped the process for the home tax deduction and made it exponentially easier for entrepreneurs to handle. The new method would extend a deduction of $5 per square foot of a residence to those with a home office or a home-based business. There would be a cap of 300 square feet for a total deduction of $1,500. The IRS also said it would save small-business owners an estimated 1.6 million hours of labor associated with the previous amount of paperwork required to claim the deduction.
“This is a common-sense rule to provide taxpayers an easier way to calculate and claim the home office deduction,” said Steven Miller, acting IRS commissioner
Not enforced until 2014
Entrepreneurs will have to hold their horses until next tax year, when the new calculation method goes into effect when they file 2013 returns. For now, you’ll still have to contend with Form 8829 when claiming a home office deduction. To ensure you do so properly, be certain to have the following information at the ready: deductible mortgage interest, real estate taxes, cost of repairs and maintenance, value of land and total area of home.
Income.com wants entrepreneurs to explore every avenue of tax savings they can, which is why it highlighted the home office deduction. However, like most aspects of entrepreneurship, you’ll have to put in a lot of work now in order to get the payoff later. A simplified calculation method is on the way, but don’t sit daydreaming out the window when you could be figuring out how to claim the deduction.