Press Releases
August 1, 2008
Conrad Bill Simplifies Tax Rules for Home Offices
Senator's Legislation Makes it Easier for Those Working from Home
Washington – Senator Kent Conrad introduced bipartisan legislation today to simplify the home office tax deduction, one of the tax code’s most complex and underutilized provisions. The Home Office Tax Deduction Simplification and Improvement Act of 2008 directs the Secretary of the Treasury to establish an optional standard deduction to encourage greater use of the incentive.
“With more and more people working from home it is important for our tax rules to stay up to date and support this new generation of entrepreneurs,” said Senator Conrad. “This legislation will simplify the tax rules, enabling those people who work at home an opportunity to concentrate on building their business as opposed to being weighed down by complex tax codes.”
In addition to instituting an optional home office tax deduction, the legislation Senator Conrad introduced with Senator Olympia Snowe (R-Maine) would make two other critical changes: First, to reflect an economy in which many business owners conduct business through the Internet or over the phone, the legislation would allow the home office deduction to be taken if the taxpayer uses the home to meet or deal with clients regardless of whether the clients are physically present. Second, the bill would allow for de minimis use of business space for personal activities so that taxpayers would not lose their ability to claim the deduction if they make a personal call or pay a bill online.
Although current tax law permits a deduction of expenses associated with the business use of a taxpayer’s residence, few choose to file for this tax break due to its complexity. The method of reporting the deduction differs depending on whether the taxpayer is an employee or self-employed, and further, whether the self-employed taxpayer has farm or non-farm income. Significantly, a 2006 survey conducted by the National Federation of Independent Business (NFIB) Research Foundation found that approximately 33 percent of small-employer taxpayers try to understand the tax rules governing home office business deductions, but only about half of those respondents believe that they actually have a good understanding of the rules. Consequently, many find the process of claiming this deduction too complex and time-consuming.
The Conrad- Snowe legislation is supported by various stakeholders, including the IRS National Taxpayer Advocate Service, the U.S. Small Business Administration’s Office of Advocacy, and the National Federation of Independent Business.
