The safe harbor provided by Rev. Proc. 2013-13 [PDF 104 KB] is an alternative to calculating, allocating, and substantiating actual expenses for purposes of satisfying the requirements of the home office deduction under section 280A.
Rev. Proc. 2013-13 applies for tax beginning on or after January 1, 2013.
Safe harbor provides a cap on amount of home office deduction
According to a related IRS release—IR-2013-5 [PDF 81 KB]—the new optional deduction under the safe harbor is capped at $1,500 per year. This cap is based on $5 a square foot for up to a maximum of 300 square feet.
Taxpayers may elect to use the safe harbor or to calculate actual expenses on a year-by-year basis (such a change is not a change in method of accounting requiring the Commissioner’s consent); however, once an election is made on a tax return, that election is irrevocable.
Taxpayers claiming the new safe harbor will not be allowed to depreciate the portion of their home used in a trade or business, but can claim allowable mortgage interest, real estate taxes, and casualty losses on the home as itemized deductions on Schedule A, Form 1040. These deductions will need not to be allocated between personal and business use, as required under the regular method.
Certain rules under the home office deduction—such as the requirement that a home office must be used regularly and exclusively for business and concerning the limit tied to the income derived from the particular business—will continue to apply under the safe harbor method.
Rev. Proc. 2013-13 includes examples illustrating the application of the safe harbor.
The IRS has requested comments concerning Rev. Proc. 2013-13; comments are due by April 15, 2013.