On June 10, Rep. John McHugh (R-N.Y.) introduced legislation that would help simplify taxes for Americans, who use a home office, by allowing them to save an additional $1,500 on their taxes next year.

Currently, the tax code allows a deduction for home office expenses for self-employed taxpayers and employees who must use their home for business purposes at their employer’s request. However, according to the Internal Revenue Services’ Office of Taxpayer Advocate, only 2.7 million of the nearly 20 million Schedule C filers in tax year 2003 took a home office deduction, despite the fact that nearly 8 million taxpayers use one or more rooms in their home for business purposes.

The Home Office Deduction Simplification Act of 2008 (H.R. 6214) would allow eligible individuals to take a standard deduction of $1,500 instead of itemizing their return. The option would not preclude taxpayers currently qualifying for the deduction from continuing to itemize their expenses should they so choose. Additionally, the deduction would be indexed for inflation, ensuring that taxpayers receive the full benefit of the home office deduction every year without necessitating further legislation.

NSBA advocates for a simpler tax code and recently conducted an online poll asking members about their view of the Home Office Standard Deduction. According to the survey, if offered, 66 percent of the respondents would be more encouraged to take a standard home office deduction rather than itemize their expenses. Of those surveyed only 25 percent currently take the home office deduction when filing their taxes. The fact that so few small business owners are taking the deduction indicates its complexity and ineffectiveness.

NSBA has endorsed this legislation and recently sent Rep. McHugh a letter of support stating H.R. 6214 offers taxpayers a simpler, alternative method of calculating the home office deduction. Allowing individuals to take a standard deduction instead of itemizing their return will help to increase compliance and reduce administrative costs for many small businesses. Additionally, if passed, this bill would reduce the paperwork and time spent on tax preparation for entrepreneurs managing their business out of their homes.

The legislation is currently awaiting action by the House Committee on Ways and Means.