Question

For each statement below, select either "Advantage" or "Disadvantage" to classify them with regard to the Simplified Method for determining the office in the home deduction. a. Some actual expenses (homeowners insurance, utilities) are ignored in computing the deduction. b. A standard square foot amount is set, thus simplifying recordkeeping. c. The maximum deduction is $1,500. d. The unused deduction can not be carried over to a future year.

Answer 1

Answer:

A. Some actual expenses (homeowners insurance, utilities) are ignored in computing the deduction(Advantage).

B. A standard square foot amount is set, thus simplifying recordkeeping(Advantage)

C. The maximum deduction is $1,500(Advantage)

D. The unused deduction can not be carried over to a future year(Disadvantage)

Explanation:

There are two methods which are used for determining the home office deduction. These methods are the simplified method and the regular method. These two methods are used when considering the floor space, deductions to be made as well as taxes. When either method is used, one must stick to that method throughout that year or period.

The simplified method used when determining the home office deduction is pretty understandable: the homeowner receives a standard deduction of $5 per square foot with a total amounting to 300 square feet which must not exceed a deduction of $1,500.

For the regular method, a homeowner with a larger home office and a very high expenses, might benefit from continuing with the regular method of

determining the home office deduction. One can actually know the amount to be deducted by figuring out the percentage of your home with which you intend use for business.