The majority of micro-businesses are operated out of a home office, yet many are unwilling to pursue the typical home office tax deduction out of fear that it will trigger an IRS audit or that the qualification criteria is too difficult to meet.
Legislation known as the Home Office Tax Deduction Simplification Act (S.B. 1754) introduced this week in the U.S. Senate, however, could help home-based businesses save up to $1,500 on their taxes next year and cut through regulatory red tape.
The legislation would allow business owners the option of a $1,500 standard deduction, but would not disqualify taxpayers currently eligible for the home office deduction from continuing to itemize their expenses. Rather, it offers a taxpayer-friendly way to take the deduction.
If passed by Congress, the bill would significantly minimize the time and paperwork needed for tax preparation. The bill would also require that the amount of the standard deduction be indexed for inflation.
A similar bill was introduced last month in the House of Representatives.