NASE News

NASE Lauds Home Office Deduction Simplification Act

Schedule C Filers Would Receive $1,500 Standard Deduction

Washington, D.C., March 20, 2009 -- Business owners who work out of an office in their homes could save an additional $1,500 on their taxes next year. Legislation introduced by Congressman Kurt Schrader (D-OR), Chairman of the Finance and Tax Subcommittee of the House Small Business Committee, and Congressman John M. McHugh (R- N.Y.) would make it easier for home businesses to deduct office expenses by offering a $1,500 standard deduction to eligible taxpayers. The Home Office Deduction Simplification Act (H.R. 1509) would also require that the amount be indexed for inflation.

"We need to do everything in our power to make small businesses a central part of our economic recovery," said Schrader. "This bill will streamline the tax process that often puts an undue burden on entrepreneurship. The increased use of the home office deduction will also allow small businesses to put these savings back into the economy. That means hiring more workers, expanding their businesses, and helping rebuild our economy.

Many business owners cite complexity of the criteria to qualify as too cumbersome to follow; others also cite a fear being audited as their reason to avoid the deduction. The NASE has advocated for the simplification of the tax code for many years; three in five micro-business owners had never utilized the current home office deduction said the option of a standard deduction would encourage them to take it.

"The ability to choose a standard deduction would remove the top barriers for home business owners – being confused by the qualification criteria and being scared they'll be red-flagged for an audit," said Kristie Darien, executive director of the NASE legislative office. "Congress has taken an important step with this legislation that allows qualifying home-based businesses to more easily employ this tax benefit. Too many sole proprietors have shied away from taking the home office deduction despite being eligible for it."

The option of a $1,500 standard deduction would not preclude taxpayers currently qualifying for the home office deduction from continuing to itemize their expenses should they choose. The Home Office Deduction Simplification Act would simply offer a taxpayer-friendly way to take the deduction. Additionally, if passed by Congress, it would significantly minimize the paperwork and time spent on tax preparation for entrepreneurs managing their business out of their home.