Kurt's Work

Congressman Kurt Schrader (D-OR), a small business owner and Chairman of the Finance and Tax Subcommittee of the House Small Business Committee, and Congressman John M. McHugh (R-NY) announced today that they have introduced legislation to simplify taxes for Americans who use a home office.  The bill, the Home Office Deduction Simplification Act, HR. 1509, is designed to reduce the complexity of the tax code and would provide Americans with the ability to take a standard deduction for home office expenses without utilizing the current, more complex formula.  This is the first piece of legislation introduced by Congressman Kurt Schrader

“We need to do everything in our power to make small businesses a central part of our economic recovery,” said Schrader. “As a small business owner I understand how hard this economy is hitting businesses across the country. Small businesses make up nearly 98% of the businesses in Oregon and are a key component in job creation. This bill will streamline the tax process that often puts an undue burden on entrepreneurship. The increased use of the home office deduction will also allow small businesses to put these savings back into the economy. That means hiring more workers, expanding their businesses, and helping rebuild our economy. I’m pleased to join with my colleague Representative McHugh to work for a bi-partisan proposal to help American small businesses and family-farms.”

“Small businesses are the backbone of our economy, and this time of economic crisis demands that we support small businesses with the resources they need to continue to grow and thrive.  Historically, millions of Americans who are self-employed or work from home do not utilize the home office deduction because of its complexity, and this bill is a bipartisan solution to that problem.  While many bills in recent years have made the tax code more complicated – this bill achieves the opposite effect and allows taxpayers to take a simple deduction without apprehension,” said McHugh.  “In my Congressional District, there are 66,000 small businesses that could potentially benefit from this simplified tax structure and I am pleased to join with Congressman Schrader on this bipartisan effort.”

America’s 27 million American small businesses represent more than 99 percent of all employers, provide 51 percent of private sector employment, and make up 45 percent of the United States’ payroll.  Small businesses also produce approximately 50 percent of the nation’s private, nonfarm GDP.  As a result of technological advancements and other significant changes in the economy over the past 40 years, many more small businesses are now able to effectively operate out of the home.  According to the Internal Revenue Service (IRS), the home office deduction was taken on 3.3 million self-employed business returns in tax year 2006, an increase of 700,000 from tax year 2002. 

However, the IRS reports that “a substantial number of taxpayers with home office expenses are not claiming them on tax returns.”  According to the IRS, the deduction might be underutilized because “understanding and complying with the rules for deducting home office expenses can be difficult for small business and self-employed taxpayers.”  This is borne out by an IRS analysis that found almost half of the taxpayers claiming a home office deduction made errors.

The Home Office Deduction Simplification Act would allow eligible individuals to take a standard deduction of $1500 instead of itemizing their return.  Additionally, the deduction would be indexed to the cost of inflation, ensuring that taxpayers receive the full benefit of the home office deduction every year without necessitating further legislation.

The Home Office Deduction Simplification Act was referred to the Committee on Ways and Means for consideration.  The National Association for the Self-Employed, the National Federation of Independent Business, and the National Small Business Association, among others, all support the legislation.