NASE Blogs

Tax Reform Could Help Millions of Micro-businesses Avoid Leaving Money on the Table [Commentary]

Wednesday, May 12, 2010

Posted by Kristie Arslan - April 15th has come and gone, and once again millions of micro-businesses got less tax relief than they are entitled to because of the ridiculous complexity of the home office deduction.

Each year, almost 60 percent of Americans who are self-employed fail to take a home-office deduction. In round numbers, this means that $7.25 billion remained in the federal treasury instead of registering on the balance sheets of America’s smallest businesses this year alone.

The fact that so many people don’t use the deduction even though many small businesses are struggling to survive speaks for itself: the current home-office deduction is too complex and burdensome to tackle, and many who are eligible just don’t take it.

This is unacceptable given the fact that the self-employed are a critical component of the nation’s financial recovery and that they are a leading generator of new jobs. The self‐employed contribute around a trillion dollars to the U.S. economy each year and their businesses are growing at a rate of about 3.5 percent per year.

Their message to lawmakers is simple:

  • The home-office deduction must be simplified and expanded to allow home-based businesses to grow.
  • An optional standard deduction, such as the one proposed in the Home Office Deduction Simplification Act (H.R. 3615), within the range of $1,250-$1,750 will encourage those eligible to finally take the deduction. 

We hear the President and Members of Congress stand in front of the cameras day in and day out claiming that they are working for Main Street and that small business is what will pull us out of this economic decline.

What America's 23 million self-employed need is more action and fewer words.  It is time for the policy to catch up to the rhetoric.

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