‘‘(A) the only members of such joint ven-
ture are a husband and wife, 
‘‘(B) both spouses materially participate 
(within the meaning of section 469(h) without 
regard to paragraph (5) thereof) in such trade 
or business, and 
‘‘(C) both spouses elect the application of 
this subsection.’’. 
(b) NET EARNINGS FROM SELF-EMPLOYMENT.— 
(1) Subsection (a) of section 1402 of such Code 
(defining net earnings from self-employment) is 
amended by striking ‘‘and’’ at the end of paragraph 
(15), by striking the period at the end of paragraph 
(16) and inserting ‘‘; and’’, and by inserting after 
paragraph (16) the following new paragraph: 
‘‘(17) notwithstanding the preceding provisions 
of this subsection, each spouse’s share of income or 
loss from a qualified joint venture shall be taken 
into account as provided in section 761(f) in deter-
mining net earnings from self-employment of such 
spouse.’’. 
(2) Subsection (a) of section 211 of the Social 
Security Act (defining net earnings from self-em-
ployment) is amended by striking ‘‘and’’ at the end 
of paragraph (15), by striking the period at the end
of paragraph (16) and inserting ‘‘; and’’, and by in-
serting after paragraph (16) the following new para-
graph: 
‘‘(17) Notwithstanding the preceding provisions 
of this subsection, each spouse’s share of income or 
loss from a qualified joint venture shall be taken 
into account as provided in section 761(f) of the In-
ternal Revenue Code of 1986 in determining net 
earnings from self-employment of such spouse.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 204. INCREASE IN SELF-EMPLOYMENT EXEMPTION 
AMOUNT. 
(a) IN GENERAL.—Paragraph (2) of section 1402(b) 
(defining self-employment income) is amended by striking 
‘‘$400’’ and inserting ‘‘$1,000’’. 
(b) ADJUSTMENT
FOR INFLATION.—Section 1402 
(definitions relating to self-employment income) is amend-
ed by adding at the end the following new subsection: 
‘‘(l) ADJUSTMENT FOR INFLATION.— 
‘‘(1) IN GENERAL.—In the case of any taxable 
year beginning in a calendar year after 2006, the 
$1,000 amount contained in subsection (b)(2) shall 
be increased by an amount equal to—
‘‘(A) $1,000, multiplied by 
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for the calendar 
year in which the taxable year begins by sub-
stituting ‘calendar year 2005’ for ‘calendar year 
1992’ in subparagraph (B) thereof. 
‘‘(2) ROUNDING.—If any increase determined 
under paragraph (1) is not a multiple of $10, such 
increase shall be rounded to the next lowest multiple 
of $10.’’. 
(c) RETURN REQUIREMENTS.—Section 6017 (relat-
ing to self-employment tax returns) is amended by striking 
‘‘of $400 or more’’ and inserting ‘‘of an amount which 
equals or exceeds the amount in effect under section 
1402(b)(2)’’. 
(d) CONFORMING AMENDMENTS.— 
(1) Paragraphs (3) and (4) of section 1402(e) 
are each amended by striking ‘‘of $400 or more’’ 
and inserting ‘‘which equals or exceeds the amount 
in effect for the taxable year under subsection 
(b)(2)’’. 
(2) Subsection (h) of section 1402 is amended 
by striking ‘‘$400’’ and inserting ‘‘the amount in ef-
fect for the taxable year under subsection (b)(2)’’.
(3) Subparagraph (B) of section 1402(j)(2) is 
amended to read as follows: 
‘‘(B) FLOOR.—In applying paragraph (2) 
of subsection (b) to church employee income, 
‘$200’ shall be substituted for the amount in ef-
fect for the taxable year under such paragraph 
(2) (as adjusted by subsection (l)).’’. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2005. 
SEC. 205. STANDARD HOME OFFICE DEDUCTION. 
(a) IN GENERAL.—Section 280A(c) is amended by 
adding at the end the following new paragraph: 
‘‘(7) STANDARD HOME OFFICE DEDUCTION.— 
‘‘(A) IN GENERAL.—The deductions allow-
able by this chapter by reason of being attrib-
uted to a use referred to in paragraph (5) (be-
fore the application of paragraph (5)) shall not 
be less than the lesser of— 
‘‘(i) $2,500, or 
‘‘(ii) the gross income of the trade or 
business in which such use occurs. 
‘‘(B) INFLATION
ADJUSTMENT.—In the 
case of any taxable year beginning in a calendar 
year after 2006, the $2,500 amount contained