Question

Melanie is employed full-time as an accountant for a national hardware chain. She 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 2020 are as follows:

Real property taxes $3,600

Interest on home mortgage $3,800

Operating expenses of home $900

Melanie's residence cost $350,000 excluding land and has a living space of 2,000 square feet, of which 20% (400 square feet) is devoted to business. The office was placed in service in February 2019, and under the Regular Method, Melanie had an unused office in her home deduction of $800 for 2019. Presuming sufficient net income from her consulting practice, what is Melanie's office in the home deduction under the:

A. regular method

B. simplified method

Answer 1

Regular Method Deduction
Particular	Amount	Working
Real propert Tax	$720	($3600*20%)
Interest on Home Mortgage	$760	($3800*20%)
Operating expense	$180	($900*20%)
Depreciation	$1795	($350,000*2.564%*20%)
home deduction	$800
Home deduction Under Deductible Methos	$4255
Note: 20% are used for Business
Simplified Method od Deduction
Under Simplified Method ome deduction should be $5 Per Square feet used for business purpose Subject to a maximum 300 Square feet
Melanie is using 400 Square feet for business purpos, Hence the maximum deduction for office in home would be $1500( 300 Square Feet *$5)