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Tax-time tips for at-home workers

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  • Obama stimulus legislation offers perks for home-based entrepreneurs
  • Package offers more incentives to buy equipment
  • Small-business owners can carry back losses for additional years
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By John Blake
CNN
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(CNN) -- It is at least 1,000 pages long. It costs $787 billion. And it's as thick as two telephone books.

Experts say home-based workers can benefit from tax changes in the stimulus package

Experts say home-based workers can benefit from tax changes in the stimulus package

The size and scope of President Obama's stimulus package is staggering. But for many Americans who work at home, their concerns about the package can be reduced to one question: What's in it for me?

There are indeed some goodies in the stimulus package for people who work at home, several tax experts say. They examined the package to see how its tax changes would help those workers who go solo and they highlighted several areas.

At least one, Heather Villa, CEO and founder of IAC-EZ (www.iacez.com), which offers bookkeeping and tax preparation software for small businesses, came away impressed with the entire package.

"The tax changes in President Obama's stimulus package are going to help everyone, not just work from home individuals," Villa said. "The variety of incentives, credits and breaks that the government has devised are well rounded."

Tax experts said there are no tax changes in the plan that specifically target people who work at home. Yet it does contain several provisions aimed at small businesses.

The highlighted provisions include:

More incentive to buy equipment

Michael Lloyd, a tax attorney with Miller & Chevalier in Washington, said the stimulus plan gives a "little shot" in the arm to people who work from home and want to buy equipment for their businesses.

He said IRS guidelines generally dictate that businesses must depreciate equipment purchases over the economic life of the property.

But the stimulus plan's small-business equipment expensing rules generally allow a business to immediately write off the cost of equipment -- up to $250,000 in the year of purchase, Lloyd said. The result: small businesses will pay significantly less income tax than they would otherwise pay if they make significant equipment purchases.

The stimulus package increased this one-year deductible threshold from $125,000 to $250,000 for small businesses. The package also included separate bonus depreciation rules that will benefit larger businesses, he said.

"It's just a way to entice people to go out, buy equipment and make investments," Lloyd said. "Being a small-business owner is tough. There are all kinds of obstacles."

Expanded broadband Internet access

"Although it doesn't save home workers any tax dollars, the stimulus package does include incentives to expand broadband Internet access to underserved areas, which may allow more people to work from home," said Kathleen Pakenham, a tax partner with White & Case law firm.

The incentives include grants and loans to local governments and nonprofit groups that are designed to improve broadband Internet access and service, Pakenham said.

A boost from the new Making Work Pay Credit

The Making Work Pay Credit is equal to 6.2 percent of the individual's earned income or $400 ($800 for married filing jointly), whichever is less, said Villa, founder of IAC-EZ. She said 6.2 percent is the rate of Social Security tax. The result: A person receives a credit equal to Social Security withholding.

"The big news here is that many credits are never applicable to self-employed individuals," Villa said. "This credit is.

Small-business owners can carry back losses for more years

Under previous law, small businesses could only carry back their net operating losses for a maximum of two tax years, Villa said. A net operating loss occurs when your deductions are more than your income for the year, Villa said. A loss from operating a business is the most common reason for a net operating loss.

"With the 2008 stimulus package, this will permit you to carry back losses for up to five years for small businesses with gross revenue of $15 million or less,'' Villa said. "This is an excellent benefit."

All About Barack ObamaInternal Revenue ServiceEconomic Stimulus

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