New Bill Would Create Standard Home-Office Deduction

Legislation introduced this week by Rep. John McHugh (R- N.Y.) would make it easier for home businesses to deduct home office expenses by offering a $1,500 standard deduction to eligible taxpayers.

The Home Office Deduction Simplification Act (H.R. 6214) also would require that the amount be indexed for inflation. 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 if they choose.

Many business owners support a standard deduction because they say the criteria to qualify for the current deduction is too complicated to figure out while others believe that a home-office deduction may encourage the IRS to audit them.

According to the Office of the Taxpayer Advocate at the IRS, only 2.7 million of the nearly 20 million Schedule C filers in tax year 2003 took a deduction for home-office expenses, even though about 8.4 million filers indicated that they had one or more rooms used only for business.

A spokeswoman for Rep. McHugh said the congressman chose to set the deduction at $1,500 because past legislative efforts that have set it at $2,500 have failed over the cost. McHugh saw $1,500 as a more palatable, middle ground, she said.

Also on Capitol Hill this week, Sens. John Kerry (D-Mass.), Olympia Snowe (R-Maine) and Reps. Michael Michaud (D-Maine) and Donald Manzullo (R-Ill.) introduced a measure to help protect America's 27 million small businesses from computer hackers and other information security breaches. The Small Business Information Security Act (S. 3102 and H.R. 6206) would create a small business information security task force within the Small Business Administration to help small firms understand and respond to information security challenges.

Separately, the SBA's Office of Advocacy recently sent a letter to Reps. Stephen Buyer and Jim Matheson in support of their bill (H.R. 5839) that seeks to address the concerns of small secondary and independent pharmaceutical distributors as they relate to the Food and Drug Administration's drug pedigree rule. The rule requires drug distributors and wholesalers to provide a drug pedigree of pharmaceuticals as the drugs make their way through the United States supply system. Advocacy told the FDA that the rule might be too burdensome for small secondary drug distributors, although the office supports the intention of the rule, which is to prevent substandard and counterfeit drugs from entering the drug supply chain.

By Sharon McLoone |  June 11, 2008; 5:00 PM ET Regulation Legislation , Tax Tips
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Standard deduction for home office of $1500?? Heck, the percentage for heating alone would be more than that this year!
As usual Washington is in a bubble and has no idea what is going on in the real world.

Posted by: Rob | June 26, 2008 3:01 PM

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