In the internet age the number of people able to run businesses from their home has increased. The Internal Revenue Service has reminded United States taxpayers with home-based businesses that this year, for the first time, they can choose a simplified option for claiming the individual income tax deduction for business use of a home.

In the fiscal year 2011 – the most recent year for which figures are available – some 3.3m taxpayers claimed deductions for the business use of a home (commonly referred to as the home office deduction) totaling nearly USD10bn. The deduction is capped at USD1, 500 per year, a cap which is calculated by multiplying the square footage of work space by USD5.

The new optional deduction will reduce the paperwork and record-keeping burden on small businesses by an estimated 1.6m hours annually, according to the IRS. It is available starting from the 2013 return that taxpayers are currently filing. Normally, home-based businesses are required to fill out a 43-line form often with complex calculations of allocated expenses, depreciation, and carryovers of unused deductions. Taxpayers claiming the optional deduction need now only complete a short worksheet, and enter the result on their return.

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

Business expenses unrelated to the home, such as advertising, supplies, and wages paid to employees, are also still fully deductible. However, long-standing restrictions on the home office deduction, such as the requirement that a home office be used regularly and exclusively for business purposes, and the limit tied to the income derived from the particular business, still apply under the new option.