The IRS announced a simplified safe harbor method that individuals may use to compute the home office deduction. The safe harbor is an alternative to the calculation and allocation of actual expenses otherwise required under IRC Sec. 280A . The new optional deduction is limited to $1,500 per year based on a rate of $5 multiplied by the square footage of the home used for business purposes (up to 300 square feet). Under the safe harbor, (1) no depreciation or Section 179 deduction for the portion of the home used in a business is allowed for the year, (2) disallowed amounts carried over from a prior tax year where the taxpayer calculated and substantiated actual expenses may not be deducted in a year in which the safe harbor was used, (3) taxpayers may elect the method from year to year, and (4) all requirements of Section 280A must continue to be satisfied in determining eligibility to claim a deduction. In 2010, approximately 3.4 million taxpayers claimed home office deductions. This procedure is effective for tax years beginning after 12/31/12.
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