Question

Melanie is employed full-time as an accountant for a national hardware chain. She also has recently started a private consulting practice, which provides tax advice and financial planning to the general public. For this purpose, she maintains an office in her home. Expenses relating to her home for 2019 are as follows:

Real property taxes $5,000

Interest on home mortgage 6,000

Operating expenses of home 1,250

Melanie's residence cost $415,000 (excluding land) and has living space of 2,000 square feet, of which 22% (440 square feet) is devoted to business. The office was placed in service in February 2018, and under the Regular Method, Melanie had an unused office in the home deduction of $1,850 for 2018. Assume there is sufficient net income from her consulting practice. Round your final answer to nearest dollar.

a. What amount can Melanie claim this year for her office in the home deduction under the Regular Method? $

b. What is Melanie's office in the home deduction under the Simplified Method? $

Answer 1

a) REGULAR METHOD DEDUCTIONS:

Real Property Tax = $5000 * 22% used in business =$1100

interest on home mortgage =$6000 * 22% =$1320

operating expense = $1250 * 22%    =$275

depreciation = $415000 * 22% * 0.02564    =$2341

Total    =$5036

Melanie is self employed as to her consulting activity , the expenses are deductions for AGI ,reported on scheduled C

b)SIMPLIFIED METHOD DEDUCTION

the home deduction should be $4.5 per square that are used for the business puposes subject to maximum of 340 feet.

we know that melanie is using 440 square feet.

=340*$4.5

=$1530