Question

Jamison is self-employed and he works out of an office in his home. Jamison itemizes his deductions, and the sum of his itemized deduction for non-home business taxes and the real property taxes allocated to business use of the home is less than $10,000. After allocating the home-related expenses between the business office and the rest of the home, which of the following statements regarding the sequence of deductibility of the expenses allocated to the home office business use is correct?
a. Depreciation expense, other expenses, property taxes and interest expense.
b. Other expenses, depreciation expense, property taxes and interest expense.
c. Interest expense and property taxes, other expenses, depreciation expense.
d. Other expenses, property taxes and interest expense, depreciation expense.

Answer 1

Answer: c. Interest expense and property taxes, other expenses, depreciation expense.

Explanation:

In terms of deductibility, interest expenses such as mortgages take precedence along with taxes on property.

After this comes other expenses starting first with direct expenses incurred in providing Jamison's services then there will be other expenses such as insurance, periodic repairs and admin expenses.

At the bottom of the hierarchy is depreciation expense which is the last expense that can be deducted