Home biz may get a break
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February 20, 1997: 8:48 p.m. ET
Proposal would expand tax deduction for U.S. home-based businesses
From Correspondent Kelli Arena
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WASHINGTON (CNNfn) -- Thousands of U.S. homeowners who run businesses from their houses could soon benefit from a new legislative effort on Capitol Hill.
The proposal, sponsored by Sen. Kit Bond, the Missouri Republican who chairs the Senate Small Business Committee, would redefine and broaden tax deductibility of home-office expenses.
The bill would likely include terms restoring a home-office deduction that a U.S. Supreme Court decision restricted in 1993.
That ruling prohibited most small-business owners from deducting home-office expenses if they perform a large amount of work outside of the home.
While reversing the 1993 decision, Bond's proposal would also allow the self-employed to deduct 100 percent of their health-care premiums, up from a current 40 percent.
Additionally, the measure would simplify the U.S. tax code's definition of "independent contractors."
Many think the changes are long overdue.
"The Internal Revenue Service has been particularly hard on home-based businesses," said Gail Blachly, a graphic designer and one of about 9 million Americans who operate home-based businesses.
Blachly feels IRS agents "have always considered (home offices to be) some type of tax scam or shelter, but many people can operate best from their homes."
Added Kate Fowle, a glass-bead maker who works out of her home: "When I sit down to do the taxes -- and I've already done them this year -- it's excruciating," Fowle said.
Experts say Bond's proposal could help out new small businesses during their critical start-up period. "Most businesses fail in the first year," said Susan Eckerly of the National Federation of Independent Business. (85K WAV) or (85K AIFF)
Observers expect the legislation to attract sizable bipartisan support.
They say the measure could pass quickly, saving millions of home-based capitalists some money -- possibly as early at the 1997 tax year.
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