Question

Dennis is a self-employed hair stylist who operates a salon in his home. The property taxes and interest allocated to the business amount to $5,000, maintenance and utilities allocated to the business total $2,100, and depreciation allocated to the business use of the home equals $3,100 for the current tax year.

a. ​ If Dennis' gross revenue after deducting supplies for his business is $5,900 for the current tax year, calculate his allowable deductions for the home office.

b. ​ If Dennis' gross revenue after deducting supplies for his business is $13,800, calculate his allowable deductions for the home office.

Answer 1

Dennis is self employed hair stylist.

Available deductions

Property taxes and interest = 5,000

Maintenance & utilities = 2,100

Depreciation allocated = 3,100

(a)

If Gross Revenue after deduction of supplies is $5,900

Then allowable deductions are interest and taxes of $5,000 and maintenance and utility of $900.

Allowable deduction =$5,900

Tye remaining amount is carried over

(b)

If Gross Revenue after deduction of supplies is $13,800

Then total available deductions are allowable.

So allowable deductions = 5,000 + 2,100 + 3,100 = $10,200

Note :

We have used regular method