NASE in the News

Legislators Take On Home Office Deduction

Important Tax Benefit for Home-based Entrepreneurs To Be Simplified

Washington, D.C., September 24, 2009 – New legislation could help self-employed business owners who work from a home office save an additional $1,500 on their taxes next year. Congressman Kurt Schrader (D-OR), Chairman of the Finance and Tax Subcommittee of the House Small Business Committee, and Congressman Devin Nunes (R-CA), a member of the House Ways and Means Committee, have re-introduced bi-partisan legislation to simplify the filing process for the home office deduction by providing for an optional standard deduction. Representatives Ron Kind (D-WI) and Vern Buchanan (R-FL) are also named as primary co-sponsors of this bill.

With the majority of micro-businesses being operated from an office inside the home, the Home Office Tax Deduction Simplification Act (H.R. 3615) will ease tax time worries for millions of entrepreneurs. The legislation would allow business owners the option of a $1,500 standard deduction, but would not preclude taxpayers currently qualifying for the home office deduction from continuing to itemize their expenses should they choose. It would simply offer a taxpayer-friendly way to take the deduction. 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. The bill would also require that the amount of the standard deduction be indexed for inflation.

Many business owners cite complexity of the criteria to qualify for the deduction as too cumbersome; others cite a fear being audited as their primary reason for avoiding this deduction. The NASE has advocated for the simplification of the tax code, specifically the home office deduction, for many years. In a 2008 NASE poll, three in five home-based business owners admitted they did not utilize the current home office deduction. Of those, nearly two-thirds said the option of a standard deduction would encourage them to take it.

"The home office deduction is the perfect example of a commonsense deduction that has become so complicated that qualifying taxpayers forgo this vital tax benefit.” said Kristie Arslan, executive director of the NASE legislative office. “An optional standard deduction would remove the barriers faced by eligible home-based entrepreneurs and allow them to take a tax deduction they greatly need in this difficult economic time.”

"Small businesses are the job creators in our economy,” said Schrader. “This bill will streamline the tax process that often puts an undue burden on entrepreneurship allowing small businesses to put these savings back into the economy. That means hiring more workers, expanding their businesses, and helping rebuild our economy. I’m pleased to join with my colleague Representative Nunes to work for a bi-partisan proposal to help American small businesses and our economy.”