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******* Scenario 2: Home Office Deduction & Business Use of Home ...

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Accounting

*******
Scenario 2: Home Office Deduction & Business Use of Home
Sole Proprietorship Business Income: $80,000
Qualifies for the home office deduction. Home office is 400 sq. ft in a 2,000 sq. ft house.
Eligible home-related expenses:
Mortgage Interest: $8,000
Property Taxes: $5,200
Utilities: $3,000
Homeowner's insurance: $1,500
Depreciation on the home: $4,000
Interest Income: $800
Itemized Deductions (includes non-home-office portion of above expenses): $25,000
Allowable deduction for self-employment tax: $6,500
Calculate:
The home office deduction.
AGI, Taxable Income, and Total Tax Liability

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