Small Business Advocate Pleased by Move to Simplify Home Office Deduction

By at 16 January, 2013, 9:24 am

CONTACT: Karen Kerrigan,

Washington, D.C. – For more than fifteen years, the Small Business & Entrepreneurship Council (SBE Council) has been working to simplify the home office deduction to make it easier for entrepreneurs working out of the home, and home-based employees, to use the deduction. Yesterday, the U.S. Department of Treasury announced that it will provide a simpler option to do just that, and SBE Council president & CEO Karen Kerrigan said she was pleased by the news.

“Our tax laws have become more complex, and certain provisions have not kept pace with the modern economy.  It is gratifying to see progress in the tax code, which better reflects where and how people work.  The new option for claiming the home office deduction will be helpful for many small business taxpayers and new entrepreneurs who are confused and intimidated by the complexity of the home office deduction.  Certainly there will be many ‘home-based’ entrepreneurs and employees who will find the new and simplified option an attractive one,” said Kerrigan.

For tax year 2013, taxpayers will have the option of deducting their home office with a simple method – calculating $5 per square foot for up to 300 square feet of office space, or $1,500.  They will also have the choice of using the current method with Form 8829, which may provide a bigger deduction but is more cumbersome and complex.  Current Form 8829 has 43 lines and is accompanied by an intimidating 35-page IRS publication.   As Kerrigan noted, having the choice of a standard deduction will align with the needs of certain entrepreneurs and employees who reside in areas of the country with more modest living costs, for start up businesses, or those who just prefer simplicity.

“Simplifying the home office deduction is one way we can encourage entrepreneurship. It’s another way to show the federal government is listening to small businesses,” added Kerrigan.

The move by the U.S. Treasury to provide the optional method for the deduction mirrors proposed legislation supported by SBE Council. The Home Office Deduction Simplification Act has been regularly introduced in Congress on a bipartisan basis, but never made its way into a legislative vehicle that crossed both chambers.  Simplifying the home office deduction was designated a “Top 10” regulatory reform initiative by the former Chief Counsel of the U.S. Small Business Administration’s Office of Advocacy; the National Taxpayer Advocate also called for simplification; and the current Office of Advocacy recommended simplification in a 2009 report.

According to a blog piece posted by the U.S. Treasury: “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 option.”

The U.S. Treasury will be taking comments on the proposed changes, and SBE Council will review the specifics of the new option and file recommendations if warranted. For example, will the deduction be adjusted for inflation? SBE Council believes that should be the case, and will look for other details that may unintentionally restrict use by certain small business taxpayers.  In general, the move to make a simplified option available to entrepreneurs is a welcome step, according to SBE Council’s Kerrigan.

“In the context of what needs to happen to reform our entire tax system, the move to simplify the home office deduction is a modest but positive step. It is a step in the right direction,” Kerrigan added.

SBE Council is a national nonprofit advocacy, research and education organization dedicated to protecting small business and promoting entrepreneurship. For more information, please visit:

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