Legal

New Ways Working From Home Makes You Eligible for Tax Deductions

Small business owners working from home while caring for children, take note

U.S. Senator Mitch McConnell (R-KY) introduced new legislation on June 18 that would help parents receive tax deductions for childcare expenses even if they work from home.

The Working Parents Home Office Act allows working parents to deduct incidental use for childcare provided if the taxpayer is using the space for his or her business.

Senator Mitch McConnell (R – KY) United States Senate Minority Leader.

“Working from home and being able to care for young children saves on child care costs and having the option to deduct business expenses under these circumstances will help young families trying to run their own business in this struggling economy,” McConnell says.

“My bill would fix a flaw in the tax code so that men or women who work from home aren’t prevented from claiming a deduction for a home office if that office includes a baby crib so they can care for their child while working. The Working Parents Home Office Act would not only help parents save on child care costs, it would help increase their earning potential by incentivizing them to create new income streams from home.”

The legislation has been lauded by the National Association for the Self-Employed (NASE), which has worked on behalf of the small business community to advocate for a simpler home office filing option that allows small business owners and employees who work from home and who maintain a qualifying home office to deduct up to $1,500 per year.

Qualified taxpayers may annually deduct $5 per square foot of home office space on up to 300 square feet, for as much as $1,500 in deductions. To take advantage of this new option, taxpayers will complete a much simpler version of the current 43-line form.

“Millions of Americans are pursuing dreams of owning and operating their own small business, but the sad truth is there are numerous barriers preventing them from succeeding,” says Katie Vlietstra, vice president for government relations and public affairs with NASE. “Senator McConnell’s legislation … is another effort targeted at relieving one of those barriers for working parents operating an at-home small business.”

Earlier this year, McConnell and Senator Kelly Ayotte (R-NH) also introduced the Family Friendly and Workplace Flexibility Act, which would enable working mothers to enter into a voluntary agreement with their employers whereby they could bank overtime compensation in the form of time-off with their families. It would give families the choice, not just the employer.

Kathryn Jones