[Congressional Record (Bound Edition), Volume 148 (2002), Part 11]
[Extensions of Remarks]
[Page 14878]
[From the U.S. Government Publishing Office, www.gpo.gov]




 SIMPLIFY THE HOME OFFICE DEDUCTION HOME OFFICE TAX SIMPLIFICATION ACT

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                            HON. MAC COLLINS

                               of georgia

                    in the house of representatives

                        Thursday, July 25, 2002

  Mr. COLLINS. Mr. Speaker, I rise today, Joined by my colleague the 
Majority Whip of the House, to introduce the Home Office Simplification 
Act. This legislation will provide much-need simplification for home-
based small business owners which will total 11 million this year.
  Today's tax code allows an individual who operates a small business 
in their home to deduct certain expenses associated with running that 
home-based business. But not surprisingly, this provision of the tax 
code is incredibly complex. Since the vast majority of home business 
operators cannot afford an accountant or tax attorney to decipher all 
the requirements and avoid potential tax traps, they simply decline to 
file for the deductions that they are actually eligible for.


                           Standard Deduction

  First, the legislation creates a standard deduction of $2500. 
Taxpayers who meet eligibility requirements could avoid the 
administrative and calculations nightmare required by itemizing by 
simply claiming a standard deduction. The $2500 benefit is the 
equivalent of the average tax home office benefits claimed by those who 
filed in recent tax years. This amount would be indexed to annual 
inflation.


              Repeal of Depreciation Recapture Provisions

  This legislation also addresses one of the key deterrents that 
prevent small business owners from claiming the tax benefits for a 
home-based business--depreciation recapture provisions. Under changes 
to the law made in 1997, a home-based business owner, like any other 
business, can depreciate or ``write off'' over time, capital asset 
investments they make in their business. However, if at some point they 
sell the home, then that depreciation must be ``recaptured.'' The 
effect of that requirement is that homeowners do not get the full 
benefit of the capital gains tax exclusion which exempts S250,000 
($500,000 for married) on the gain on the sale of a primary residence. 
The recapture provision put in place in 1997, should be repealed.
  This legislation is an important step in the right direction--
addressing the need to simplify the tax code for a growing sector of 
small businesses, the leading Job creators in our economy. The Home 
Office Simplification Act is a beginning effort to make the tax code 
more user-friendly for those entrepreneurs creating opportunities for 
themselves and then-families at home.

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