Simplifying the deduction for small businesses with an office in the home is one of SBA’s Office of Advocacy 2008 Top 10 Rules for Review and Reform. The Top 10 are drawn from over 80 rules nominated by small business owners and representatives as part of the SBA’s Regulatory Review and Reform initiative.
Submitted by the National Association for the Self-Employed (NASE) and Eric Blackledge, Blackledge Furniture, this is a "must read" proposal for those of you who use the deduction each year:
Internal Revenue Code section 280A(c)(1) permits a deduction for a home office if it is the principal place of business of the taxpayer, used exclusively for business, or used to meet with patients, clients, or customers.
However, current IRS regulations do not provide a concise definition of the elements of this section. In the absence of final regulations describing how to qualify for and calculate the deduction, IRS policies and case law have made it more complicated for a home-based business owner to learn how to obtain the exemption.
Home-based businesses constitute 53 percent of all small businesses.
The requirements to qualify for and calculate the deduction are confusing for taxpayers and do not account for changes in technology that affect the way business is conducted. Consequently, many at-home workers do not take advantage of the home office business deduction.
The IRS should revise the rules to permit a standard deduction for home-based businesses. Similar to the Form 1040 standard deduction, the home office business deduction should be optional. Taxpayers who wish to claim the home office deduction could choose to continue to follow the current home office deduction rules or they could choose the new standard deduction.
Home-based business owners would have a simplified, less burdensome way of taking advantage of the home office business deduction.
Internal Revenue Code section 280A(c)(1) permits a deduction for a home office if it is the principal place of business of the taxpayer, used exclusively for business, or used to meet with patients, clients, or customers.
However, current IRS regulations do not provide a concise definition of the elements of this section. In the absence of final regulations describing how to qualify for and calculate the deduction, IRS policies and case law have made it more complicated for a home-based business owner to learn how to obtain the exemption.
Home-based businesses constitute 53 percent of all small businesses.
The requirements to qualify for and calculate the deduction are confusing for taxpayers and do not account for changes in technology that affect the way business is conducted. Consequently, many at-home workers do not take advantage of the home office business deduction.
The IRS should revise the rules to permit a standard deduction for home-based businesses. Similar to the Form 1040 standard deduction, the home office business deduction should be optional. Taxpayers who wish to claim the home office deduction could choose to continue to follow the current home office deduction rules or they could choose the new standard deduction.
Home-based business owners would have a simplified, less burdensome way of taking advantage of the home office business deduction.
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