IRS Offers “Safe Harbor” for Home Office Deductions

One of the more contentious tax matters which has plagued primarily the self-employed over the years is the issue of claiming deductions for that office in the home.  So here comes the IRS, offering an optional safe harbor method that individuals can use to determine the amount of these deductions.

For tax years beginning in 2013, a bloke can deduct $5 per square foot of qualified use, up to a maximum of 300 square feet.

Recall that only in situations where strict requirements are met have deductions been allowable for direct expenses, and the business use portion of indirect expenses associated with the business use of a residence.

  • Home office expenses are deductible if part of the house is used regularly and exclusively as a principal place of business, or as a place to meet or deal with customers or clients in the ordinary course of business.  (And for folks who are employees, use of the home must be for the “convenience of the employer.”)
  • Expenses which are allocable to space within the house used on a regular basis for the storage of inventory or product samples are also deductible if the dwelling unit is the sole fixed location of the trade or business.

Home office deductions are generally limited by the amount of net income

derived from the business, with disallowed amounts available for carryover to future years.

The new safe harbor is an alternative to deducting actual expenses – as such, a chap who so elects generally won’t be able to deduct any actual expenses related to the qualified business use of his home, with a couple of exceptions:

  • If one “itemizes” his deductions, any allowable expenses related to the home which are deductible without regard to the “qualified business use” (generally, mortgage interest and property taxes) remain deductible aside from the safe harbor calculation.
  • Also, even if the safe harbor is chosen, taxpayers will continue to be able to deduct any other allowable trade or business expenses (such as wages, advertising, auto).

One other caveat:  a taxpayer using the safe harbor cannot deduct any depreciation on

the residence – no big deal, inasmuch as the bookkeeping related to this little bugaboo can create headaches, not to mention the usually measly amount of tax benefit.

CONSULT YOUR TAX ADVISOR – This article contains general information about various tax matters.  You should consult your CPA regarding the implications to your own particular situation.

Jeff Quinn, the author of this article, is a shareholder in Ashley Quinn, CPAs and Consultants, Ltd., with offices in Incline Village and Reno.  He can be reached at 831-7288, welcomes comments at, and invites readers to consider his other commentary at

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