Meg lives in a small bungalow in town which she rents from a local business person....
Meg lives in a small bungalow in town which she rents from a local business person. She uses her second bedroom in her home exclusively as a home office. She used this office space for the entire year. The office room was 10x15 and the total square footage of her home was 1200 square feet.
Meg brings to you receipts for the following home office costs. She wants you to determine what she can and cannot claim as home office expenses and calculate her deduction.
Monthly rent - $1200 per month
Purchased new desk and chair for her office - $1300
Purchased new computer to be exclusively used for her work in her home office - $796
Stationary and Office Supplies purchased during the year for her work - $175
Monthly phone line charge - $65 per month
Employment related long distance calls total for year - $310
Hydro/Electricity bills – total for the year - $1200
Paint for the living room/dining room area (one time) - $165
Repairs to window in kitchen that was leaking (one time) - $200
Property Insurance total for year - $450
Required:
- Calculate how much Meg can claim as home office expenses
- Explain items that are now allowable
- Show your work for full marks.
Homework Answers
Home office expenses are those that are used for the purpose of business. Any expense incurred by a person relating to his business is allowable.
Monthly rent $1200 - not specific so considered as personal and non claimable.
Purchased new desk and chair for her office - $1300 - claimable expense as used for business.
Purchased new computer to be exclusively used for her work in her home office - $796 -claimable expense as used for business.
Stationary and Office Supplies purchased during the year for her work - $175 - claimable expense as used for business.
Monthly phone line charge - $65 per month - not specific so considered as personal and non claimable.
Employment related long distance calls total for year - $310 - claimable expense as used for business.
Hydro/Electricity bills – total for the year - $1200 not specific so considered as personal and non claimable.
Paint for the living room/dining room area (one time) - $165 not specific so considered as personal and non claimable.
Repairs to window in kitchen that was leaking (one time) - $200 not specific so considered as personal and non claimable.
Property Insurance total for year - $450 not specific so considered as personal and non claimable.
Total deduction = $1300+796+ 175+310 = $2581
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