Ms. Flash operates her business from her home and is qualified for a home office
ID: 2556517 • Letter: M
Question
Ms. Flash operates her business from her home and is qualified for a home office deduction. The office constitutes 20% of the total square footage of her home. Her total home related expenses (mortgage interest, electric and water, real estate tax, etc.) are $27,000. Her business generates $75,000 in revenue and she incurred $70,000 in allowable business expense deductions (not including any home office deduction). What is Ms. Flash’s deductible home office expense in the current year?
27,000
5,400
5,000
0, zero
27,000
5,400
5,000
0, zero
Explanation / Answer
Ms Flash’s deductible home office expense in the current year is 0 (Zero)
Note:
Business income before any expenses is $75,000
Business expenses that would not limit home office deduction are $70,000
The home office expenses were $5400 ($27000*20%)
As 90% of income came from business conducted in the home office, So Flash can deduct all her home office expenses.
- $75,000 *90% of income from the home office = $67,500 from business use of the home
- $67,500 - $70,000 other expenses = $0 available for home office expenses
- Flash cannot deduct any home office expenses this year, but she can carry the entire $5400 to next year
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