AICPA Says IRS's Proposed Home Office Deduction Safe Harbor Method would be Simpler for Taxpayers to Use, but Recommends a Second Look at Details 

    Published May 13, 2013

    The American Institute of CPAs (AICPA) recommended, in its May 7, 2013 letter to the Internal Revenue Service (IRS), that the IRS reevaluate certain provisions for the safe harbor method of the home office deduction, as proposed earlier this year in Revenue Procedure 2013-13

    The safe harbor method was created to simplify the home office deduction for taxpayers and small business owners.  The safe harbor method would allow taxpayers to deduct home office expense at $5 per square foot for a maximum of 300 square feet of qualified home office space used, for a maximum yearly deduction of $1,500. 

    The AICPA said the proposed optional safe harbor method “would simplify the tax preparation and record-keeping process for many taxpayers and small business owners who are eligible for the deduction but who do not currently deduct home office expenses,” but recommended reevaluation of selected details.

    Among the provisions that the AICPA recommended for reevaluation are:


    • That the IRS increase the initial maximum deduction to $2,000-3,000.
    • That the IRS consider allowing taxpayers who choose the safe harbor method to deduct depreciation expense in addition to the home office deduction.
    • That taxpayers should be permitted to deduct any disallowed home office deduction carryforward in the next year, regardless of the method used.
    • That ordering rules should be established, such that the carryforwards are applied first, and then the current year’s deduction (safe harbor or actual method), and any unused deduction, which was generated by use of the actual method, would be allowed to carry forward to the next tax year.
    • That IRS designate a method of establishing a yearly or periodic cost-of-living adjustment to reflect inflation.

    For more information or to speak with someone, please contact Shirley Twillman at stwillman@aicpa.org or 202.434.9220.




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