Home office deduction amount and form to put the deduction on for 2018 draft forms? Joyce's...

Home office deduction amount and form to put the deduction on for 2018 draft forms?

Joyce's office is located in a separate room in the house ad occupies 375 sq. ft. The total square footage of the house is 2,500sq.ft. The Schnappaufs purchased the home 7/3/04 for $70,000. The local practice is to allocate 10% of the purchase price to land. The depreciation percentage for the office is 0.02564. When Joyce startsd her business on 1/1/2010, the fair market value of the house was $108,000. The total household expenses for 2018 are as follows:

Heat: 2170, Insurance: 1480, Electricity: 740, Repairs to kitchen: 3100, Cleaning: 1560.

Expert Solution

Step 1: Figure out the business percentage for your home office
A	Total area of your home (in square feet)	2500
B	Area of your home office space (in square feet)	375
C	Business percentage of home: (B/A)	15%


Step 2: Calculate the percentage of indirect expenses

	Indirect Expenses:
	Property insurance	1480
	Utilities	740
	Other indirect expenses (include detail):
	Heat	2170
	Cleaning service	1560
	Total indirect expenses	5950
	Multiply total indirect expenses by business % __	892.5
	* Repairs to Kitchen is not allowed as expenses exclusively for home


Step 3:	Calculation of Depreciation Expenses

	Purchase price of your home	70000
	Less: Cost of Land i.e. 10%	7000
	Cost Basis just your home	63000

	FMV of the house	108000
	Less: FMV of the land (i.e. 10%)	10800
	FMV just your home	97200

	*Take the lesser of the adjusted basis or the FMV to use as your depreciation calculation starting point

	Basis of Building	63000
	Business Basis of the house	9450
	Depreciation %	2.564%
	Depreciation allowable	242.30




Step 4:	Home Office Deduction

	Indirect Expenses	892.5
	Depreciation allowable	242.30
	Total Home Office Deduction	1134.8

ekkarill92 answered 2 years ago

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