Question

Melanie owns a private consulting practice, which provides tax advice and financial planning services in her local community. She reports the income and expenses from her practice on Schedule C. Melanie’s works full-time out of an office in her home. Based on square footage, the office accounts for 20% of her home. Expenses relating to her home are as follows:

• Real Property taxes: $3,600
• Interest on home mortgage: $3,800
• Operating expenses of home: $900
• Depreciation: $7,500

Melanie’s income from consulting is $8,000, and the related expenses are $5,000. She does not elect the safe harbor in Revenue Procedure 2013-13. Describe the amount and classification of deductions that Melanie is entitled to take.

Answer 1