home / study / questions and answers / business / accounting / cindy maintains a
ID: 2453600 • Letter: H
Question
home / study / questions and answers / business / accounting / cindy maintains an office in her home that comprises ...
Question
Cindy maintains an office in her home that comprises 8% (200 square feet) of total floor space. Gross income for her business is $42,00, and her residence expenses are as follows:
Real property taxes 2,400
Interest on mortgage 4,000
Operating expenses 2,200
Depreciations (based on 85 business use) 450
What is Cindy office in the home deduction base on :
The regular method?
The simplified method?
Explanation / Answer
8%
200
16
Simplified
Regular
Gross Income
4200
4200
Real Property taxes (8%)
2400
192
192
Interest Mortgage (8%)
4000
320
320
Operating Expense
2200
80
2200
Depreciation
450
0
450
3608
1038
Comparison of methods
Simplified Option
Regular Method
Deduction for home office use of a portion of a residence allowed only if that portion is exclusively used on a regular basis for business purposes
Same
Allowable square footage of home use for business (not to exceed 300 square feet)
Percentage of home used for business
Standard $5 per square foot used to determine home business deduction
Actual expenses determined and records maintained
Home-related itemized deductions claimed in full on Schedule A
Home-related itemized deductions apportioned between Schedule A and business schedule (Sch. C or Sch. F)
No depreciation deduction
Depreciation deduction for portion of home used for business
No recapture of depreciation upon sale of home
Recapture of depreciation on gain upon sale of home
Deduction cannot exceed gross income from business use of homeless business expenses
Same
Amount in excess of gross income limitation may not be carried over
Amount in excess of gross income limitation may be carried over
Loss carryover from use of regular method in prior year may not be claimed
Loss carryover from use of regular method in prior year may be claimed if gross income test is met in current year
8%
200
16
Simplified
Regular
Gross Income
4200
4200
Real Property taxes (8%)
2400
192
192
Interest Mortgage (8%)
4000
320
320
Operating Expense
2200
80
2200
Depreciation
450
0
450
3608
1038
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.