IRS Simplifies Home Office Tax Deductions

Four requirements for ministers’ eligibility.

Earlier this year the IRS announced a simplified “safe harbor” that taxpayers can use to compute a tax deduction for the business use of their home. According to IRS data, about 3.5 million taxpayers claim a deduction for the business use of their home (commonly referred to as the home office deduction).

The new optional deduction, capped at $1,500 per year based on $5 a square foot for up to 300 square feet, will reduce the paperwork and recordkeeping burden on taxpayers by an estimated 1.6 million hours annually.

“This is a common-sense rule to provide taxpayers an easier way to calculate and claim the home office deduction,” said Acting IRS Commissioner Steven T. Miller. “The IRS continues to look for similar ways to combat complexity and encourages people to look at this option as they consider tax planning in 2013.”

The new option provides eligible taxpayers an easier path to claiming the home office deduction. Currently, they are generally required to fill out a 43-line form (Form 8829) often with complex calculations of allocated expenses, depreciation, and carryovers of unused deductions. Taxpayers claiming the optional deduction will complete a significantly simplified form.

Though homeowners using the new option cannot depreciate the portion of their home used in a trade or business, they can claim allowable mortgage interest, real estate taxes, and casualty losses on the home as itemized deductions on Schedule A. These deductions need not be allocated between personal and business use, as is required under the regular method.

Current restrictions on the home office deduction, such as the requirement that a home office must be used regularly and exclusively for business and the limit tied to the income derived from the particular business, still apply under the new option. Relatively few ministers will satisfy the restrictions on a home office deduction under current law, making the new “safe harbor” unavailable. However, for those that do qualify, the safe harbor will provide a simplified method for computing the home office deduction.

For ministers to be eligible for a home office deduction, the following four requirements must be met:

  1. The home office must be exclusively used in the minister’s “trade or business.” This means the home office must not be used by other family members (for example, to watch television or do homework). The use of a part of your home for both personal and business purposes does not meet the exclusive use test. If, for example, you use a room in your home for personal purposes as well as a place where you prepare sermons and occasionally counsel church members, you may not deduct any expenses for the business use of that part of your home.
  2. The home office must be used on a regular basis in the minister’s “trade or business.” This means the home office must be used on a continuous basis by the minister for professional purposes (e.g., preparing sermons, conducting counseling, doing research, contacting members, writing correspondence, preparing for board meetings). Occasional or incidental use of the office for such purposes is not enough, even if the office is used for no other purposes.
  3. If the minister is an employee, the home office must be for the convenience of the employer. This means the home office must do more than make the employee’s job more easy or efficient—it must be essential to the performance of the job. This ordinarily is not the case when an office is available in the church. The courts and the IRS have ruled that if an employer provides employees access to an office on its premises for the performance of their duties and an employee elects to conduct these duties at home as a matter of personal preference, the employee’s use of the home office is not for the convenience of the employer, and no deduction is allowed.
  4. The home office must be the minister’s principal place of business. The tax code specifies that a home office qualifies as a principal place of business if (a) the office is used by the taxpayer exclusively and regularly to conduct administrative or management activities related to a trade or business, and (b) there is no other fixed location where the taxpayer conducts substantial administrative and management activities of the trade or business. Taxpayers who meet these requirements are eligible for a home office deduction even if they conduct some administrative and management activities at a fixed location of their business outside their home—so long as those activities are not substantial.
  5. Ministers who satisfy the requirements summarized above may be able to claim a full or partial deduction of their home office expenses—assuming that the limited exception applies. Perhaps even more importantly, they may be able to deduct their transportation costs from their home to their church, since they are traveling from one business location to another and, as a result, are not commuting. In some cases, these transportation costs will exceed the value of a home office deduction. However, ministers must recognize that few will be able to satisfy all of the requirements. After all, how many ministers have a home office that is used exclusively and regularly for business purposes and do not have an office in the church?
  6. Key point. The new simplified option is available starting with the 2013 return most taxpayers file early in 2014. Further details on the new option can be found in Revenue Procedure 2013-13, posted today on and in the 2014 edition of Richard Hammar’s Church & Clergy Tax Guide, available on
Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.

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