The IRS announced today that it would permit many taxpayers who run their businesses out of their homes to use a much-simplified method for determining the allowable deduction. Taxpayers that elect this method merely take $5 per square foot for up to 300 square feet of home office space, with the result that the home office deduction is capped at $1500 per year.
The IRS release says that this is "a common-sense rule to provide taxpayers an easier way to calculate and claim the home office deduction." The acting commissioner also noted that the agency is continuing to seek "similar ways to combat complexity." This method avoids the rather complicated calculations of involving depreciation (not deductible for any part of a home other than a home office) and mortgage interest (allocable between home office and the rest of the home for calculating the home office deduction, but generally nonetheless deductible in full) and does make the taxpayer's task much simpler, probably without a significant loss to the fisc.
This is an administratively created "safe harbor" for taking the deduction that the agency won't pursue as being illicit. The core restrictions on the deduction--namely, the requirement that the office be used "regularly" and "exclusively" for business and that the deduction not exceed the income derived from the business--still apply. Note that there are probably many taxpayers who claim a home-office deduction who are not entitled to one--either because they have nothing resembling a business being run from their home and are simply making it up to grab the deduction, or they do use a space in their home for a business but it would not qualify for the deduction under the requirements of the code. This safe harbor has nothing to do with that kind of mistaken use of the deduction--it is wrong under the "long-form" calculation and wrong under the short-form safe harbor. There is no safe harbor for someone taking the deduction, however calculated, if they do not qualify for a deduction under the essential requirements.
Details about the new home office deduction are available in the relevant rev proc: Revenue Procedure 2013-13
It is not clear under what authority the IRS actually releases such administrative simplifications. As the Rev. Proc. itself notes, this simplified mechanism is an "alternative" to the calculation "otherwise required under section 280A." The provision and similar ones are essentially regulatory exceptions to the statutory provisions, granted at the discretion of the executive branch and provided often after intense lobbying but sometimes on the agency's own determination that a problem needs addressing.