Freelancers Working from Home May Get a Break

Are you working from a home office? If so, you could catch a $1500 break on your next tax bill. The National Small Business Advocate (NSBA) reported that a new bill has been proposed by Rep. John McHugh (R-NY) to simplify home office deductions for those working from home. Do you qualify? If you have set up a home office, either because you are self-employed or because you work from home (partially or fully) for an employer, then you would be eligible as part of this proposed tax deduction.

The Home Office Deduction Simplification Act of 2008 (H.R. 6214) would allow a flat $1,500 deduction. And you would not have to itemize in order to get the deduction. As an additional bonus, the deduction would be indexed for inflation (meaning you get the full $1500 benefit each year - without requiring more legislation to account for inflation).

Would you be more likely to take a home office deduction if this bill was in place? Amazingly, the IRS reports that few of those eligible currently take the home office deduction. For example, in 2003, only 2.7 million of the 20 million filers took it. That's not much considering close to 8 million folks use a home office for business purposes. Maybe it's just been too darn complicated. A NSBA poll showed that 66 percent of respondents would be more likely to take the deduction if it didn't require that they itemize. And only 25 percent of those small business owners said they currently take a home office deduction. The House Committee on Ways and Means is currently considering the legislation - so stay tuned.