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 $376,000 (excluding land) and has living space of 2,000 square feet, of which 29% (580 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 $675 for 2018. Assume there is sufficient net income from her consulting practice.

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

Answer 1

Calculation of Amount to be claimed under Regular Method this year for her office in the Home Deduction

Particulars	Amount
Real Property Taxes ($5000 X 29% of the area used for business)	$1,450
Interest on Home Mortgage ($6000 X 29%)	$1,740
Operating Expenses of Home ($1250 X 29%) (rounded)	$362
Allocated Depreciation on Home ($376,000 X 29% X 2.564%) (rounded)	$2,796
Total ($1450 + $1740 + $362 + $2796)	$6,348
Unused Office in Home deduction (2018)	$675
Total Office in the Home Deduction	$7,023

The Real Property Taxes and Interest on Home Mortgage not claimed, $3,550 ($5,000 − $1,450) and $4,260 ($6,000 − $1740), qualify as itemized deductions from AGI.