Streamlined Home Office Deduction Could Mean Extra Bread for Small Business Owners
Small business has been the focus of Washington’s high-profile tax debate, both prior to and following the “fiscal cliff” fracas that closed out 2012. But as noisy as the small business tax issue has been, there’s been considerably more time spent debating cuts that will help a thin sliver of taxpayers in the top brackets than hashing out solutions that will help the vast majority of entrepreneurs
Fortunately, last week the tax code was improved in a fashion that will put a very helpful tax deduction within reach of the bulk of our nation’s job creators. The Internal Revenue Services announced that a new, simpler option for calculating the home office tax deduction will be available on 2013 tax returns.
Tales of tax deductions aren’t something you normally regale friends and family with around the dinner table. But when you get down to it, what this improved deduction means is that small business owners and employees working from a qualified home office will be able to deduct up to $1,500 per year. And that’s a lot of bread.
What’s more, an estimated 52 percent of small businesses have home-based offices, according to the 2007 U.S. Census. Our own 2012 polling tells the same story. Nationally, 52 percent of the smallest businesses — those with 10 or fewer employees — are home office-based, including some with employees working remotely.
Although the deduction has been around for some time, it’s been underused. In this economy, anything that can help small businesses save cash is a good thing, which is why this is such big news. The Obama Administration made the change expressly to make it easier for small businesses to file their government paperwork, which will give them more time to do what they do best — create jobs and grow the economy. It also increases the likelihood that small business owners will claim this credit and save some money.
This new development shows there are ways to help small business owners beyond just cutting income taxes. Closing loopholes favoring big corporations is a perfect example. Our polling found 72 percent of small business owners believe it’s about time Congress puts a finger in the corporate loophole dike. A sweeping 90 percent favor removing tax breaks for moving production overseas and providing incentives for bringing it home, and 7 in 10 entrepreneurs support a proposal designed to help spur small business job creation by rewarding companies that hire more workers or increase wages by giving them a tax credit.
It’s also important to remember that small business owners are very busy people who often don’t have Human Resources departments, and they want simpler ways to deal with exactly this kind of issue. Our national polling found about three-quarters of entrepreneurs agree we should allow for one-stop electronic filing of government paperwork. Simplifying this deduction is an important step toward streamlining filing processes, and that’s something small business owners have asked for.
The bottom line is, dealing with personal tax cuts is an epic battle, as we’ve seen lately. There’s no reason Congress can’t work smarter instead of harder, and push through proposals that, like this tax deduction, will do some real good for the majority of small businesses and their employees — who, as consumers, are critical to our economy. Making the home office tax deduction easier to claim means more people are likely to take advantage of it. That can lead to more money in small business coffers and consumers’ pockets.