Helping Small Business Owners and Home-Based Employees Claim the Home Office Tax Deduction
Tuesday, January 15, 2013
Deputy Secretary Neal S. Wolin and SBA Administrator Karen G. Mills
Today, many taxpayers who qualify for the home office tax
deduction are not claiming it. The reasons often cited are that
businesses and filers do not fully understand the provisions or find it too
complicated to calculate the amount.
That is about to change.
As part of ongoing efforts by the Administration to reduce
paperwork burdens, the Internal Revenue Service (IRS) announced today that it
is providing a new, simpler option for calculating the home office tax
deduction, allowing small business owners and employees who work from home and
who maintain a qualifying home office to deduct up to $1,500 per year.
The IRS also expects taxpayers to save more than 1.6 million hours per year in
tax preparation time from this simpler calculation method.
The new option allows qualified taxpayers to deduct annually $5
per square foot of home office space on up to 300 square feet, for as much as
$1,500 in deductions. To take advantage of the new option, taxpayers will
complete a much simpler version of the current 43-line form.
The announcement builds on the President's
commitment to streamline and simplify the tax code for small businesses and to
reduce the burden for tax compliance. It is part of broader efforts to make
interacting with the federal government easier and more efficient for
businesses of all sizes.
These new rules help our tax code better
reflect the needs of America's 21st Century workforce and especially small
businesses, which play a vital role in our economy. Today, more than half of
all working Americans own or work for a small business. An estimated 52 percent
of small businesses are home-based, and many of these small businesses have
home office space that would qualify for the deduction. And as technology
improves, more businesses – large and small – are going virtual and recruiting
employees from across the country, many of whom work from home offices.
Since he took office, President Obama has signed into law 18 tax
cuts for small businesses. And the recently signed American Taxpayer Relief Act
of 2012 includes extensions of several additional small business tax incentives
designed to spur innovation, support capital investment and make it easier to
hire new workers.
Today's announcement also is part of
broader effortby the President's Office
of Information and Regulatory Affairs (OIRA) to reduce paperwork burdens for
small business owners and individual taxpayers across all government
operations. Agencies have posted paperwork burden reduction updates on their
OpenGov websites, which also have more information on agencies'
regulatory "lookback” efforts.
The new option for the home office
deduction will be available starting with the Tax Year 2013 return, which most
taxpayers file early in 2014. In addition, the IRS is accepting comments
for improving upon this new option.
Current restrictions on claiming the home
office deduction, such as the requirement that a home office be used regularly
and exclusively for business and the limit on the amount of the deduction tied
to income derived from the particular business, still apply under the new
Wolin is the Deputy Secretary of the U.S. Department of the Treasury and Karen
G. Mills is the Administrator of the Small Business Administration.