Safe Harbor Provides Simplifies Option for Claiming Home Office Deduction

Rev Proc 2013-13, 2013-6 IRB, IR 2013-5

In a Revenue Procedure, IRS has provided an optional safe harbor method that individuals
can use to determine the amount of their deductible home office expenses, effective
for tax years beginning on or after Jan. 1, 2013. The safe harbor—$5 × square feet
of qualified use (up to 300 square feet)—provides an alternative to the calculation,
allocation, and substantiation of actual expenses required under Code Sec. 280A.

Background. The general rule under Code Sec. 280A(a) is that no deduction
is allowed for the business use of a dwelling unit that’s also used by the taxpayer
as a residence during the tax year. But under exceptions, if strict requirements
are met, deductions are allowed for direct expenses and the business-use part of
the indirect expenses relating to business use of a residence:

  • Home office expenses are deductible if part of the home is used regularly and exclusively
    as (1) a principal place of business, or (2) as a place to meet or deal with customers
    or clients in the ordinary course of business. Taxpayers who are employees must
    meet an additional test—their use of the home office must be for the convenience
    of the employer. (Code Sec. 280A(c)(1))
  • Expenses that are allocable to space within the dwelling unit used on a regular
    basis for the storage of inventory or product samples held for use in the taxpayer’s
    trade or business of selling products at retail or wholesale are deductible if the
    dwelling unit is the sole fixed location of the trade or business. (Code Sec. 280A(c)(2))
  • Expenses that are attributable to the rental of the dwelling unit or a part of the
    unit are deductible. (Code Sec. 280A(c)(3))
  • Expenses that are allocable to the part of the dwelling unit used on a regular basis
    in the taxpayer’s trade or business of providing day care for children, for individuals
    who have attained age 65, or for individuals who are physically or mentally incapable
    of caring for themselves are deductible. (Code Sec. 280A(c)(4))
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