Question

Rita owns a sole proprietorship in which she works as a management consultant. She maintains an office in her home (500 square feet) where she meets with clients, prepares bills, and performs other work-related tasks. Her business expenses, other than home office expenses, total $5,680. The following home-related expenses have been allocated to her home office under the actual expense method for calculating home office expenses.

Real property taxes	$	1,640
Interest on home mortgage		5,160
Operating expenses of home		820
Depreciation		1,624

Also, assume that, not counting the sole proprietorship, Rita’s AGI is $60,800.

Assume Rita’s consulting business generated $15,200 in gross income. (Leave no answer blank. Enter zero if applicable.)

b. What would Rita’s home office deduction be if her business generated $10,200 of gross income instead of $15,200? (Answer for both the actual expense method and the simplified method.)

Actual Expense Method ?

Simplified Method $1,500

Answer 1

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Answer is highlighted in yellow: Actual expense method (1640+5160) (Limited to Mortgage interest and Property tax) Solution: b) $ 6,800 Similified method (300*5) 1,500