Apr 18, 2014
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The Farm CPA

RSS By: Paul Neiffer, Top Producer

Paul is now part of the fourth generation in America that is involved in farming and hopes the next generation will be involved also. Through his blog he provides analysis and insight to farmer tax questions.

Remember Your Simplified Home Office Deduction

Jan 03, 2014

Beginning this year, a taxpayer is allowed to use a simplified home office deduction. In years past, a taxpayer was required to calculate this deduction based upon the office square footage divided by the home's total square footage. This percentage was then multiplied against the following items:

  • Interest
  • Real estate taxes
  • Insurance
  • Repairs
  • Other home costs
  • Or Rent

The sum of these numbers plus a representative share of the depreciation on the home office was the calculated home office deduction.

However, for 2013, the IRS now allows a simplified home office deduction and they just released publication 587 which gives you the details on how to calculate the deduction. In brief, the deduction is simply $5 times your total office space used in the home. If you choose to use the simplified method, you are not locked into using it in the future. You can switch from one to the other each year. If you have carry over home office deductions, these are not deductible until you use the regular method. The limit on the simplified method is 300 square feet times $5 or $1,500.

For many farmers who have a home office in their personal residence, this may be a much simpler method and in some cases, it will yield a greater deduction.

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