IRS Simplifies Home-Office Deduction
The IRS is reducing the recordkeeping required for the home-office deduction, effective for 2013. Taxpayers who qualify may use a new optional deduction calculated at $5 a square foot for up to 300 square feet of an area in a home that is used regularly and exclusively for business. The deduction is capped at $1,500 a year.
Taxpayers opting for the simplified deduction cannot depreciate a portion of the home as they can under the other method. However, business expenses not related to the home, such as advertising, supplies, and employee wages are still fully deductible. This simplified option is available starting with the 2013 tax return which will be filed in 2014.
Extended provisions in the American Taxpayer Relief Act of 2012
The Act extended familiar itemized deductions, including state and local sales tax and the premiums you pay for mortgage insurance on your home.
Above-the-line deductions, such as the qualified tuition deduction for higher education expenses and the $250 deduction for unreimbursed expenses if you’re a teacher, are also available for both 2012 and 2013.
Another tax break that was renewed: the ability to contribute up to $100,000 from your traditional IRA to a qualified charity. As before, when you’re age 70½ or older, you can make a distribution directly from your IRA to the charity. The amount you donate is not included in gross income, and you can consider it part of your required minimum distribution for the year.
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