Cindy, who is self-employed, maintains an office in her home that comprises 24% (290 square feet) of total floor space. Gross income for her business is $53,150, and her residence expenses are as follows:Real property taxes 2,400Interest on mortgage 4,000Operating expenses 2,200Depreciations (based on 85 business use) 450What is Cindy office in the home deduction base on : The regular method? The simplified method?

Question

Adeline

Business

3 May, 18:26

Cindy, who is self-employed, maintains an office in her home that comprises 24% (290 square feet) of total floor space. Gross income for her business is $53,150, and her residence expenses are as follows:Real property taxes 2,400Interest on mortgage 4,000Operating expenses 2,200Depreciations (based on 85 business use) 450What is Cindy office in the home deduction base on : The regular method? The simplified method?

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Answers (1)

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Koen · Answer 1

The correct answer for regular method is $2,514 and for simplified method is $1,450.

Explanation:

According to the scenario, the computation of the given data are as follows:

Regular Method:

Total home deduction = (Real property taxes * 24%) + (Interest on mortgage * 24%) + (Operating expenses * 24%) + (Depreciation)

So, by putting the value, we get

Total home deduction = ($2,400 * 24%) + ($4,000 * 24%) + ($2,200 * 24%) + ($450)

= $576 + $960 + $528 + $450

= $2,514

Simplified Method:

According to simplified method, the maximum deduction per square ft. can be $5.

So, Home deduction = $5 * 290 Sq. ft.

= $1,450.