Answer:
Sabin
Home Office Deduction:
A) Assuming Sabin uses the "regular method" to compute the office in the home deduction, his deduction is:
= $962.
B) Assuming Sabin uses the "simplified method" to computer the office in the home deduction, his deduction is:
= $1,500.
Explanation:
a) Data and Calculations:
Gross business income $24,000
Home office space = 8%
Exclusive business expenses = $5,000
Qualified home office expenses:
Real property taxes $2,400
Mortgage interest 4,000
Depreciation 5,625 ($450/8%)
Total home office expenses $12,025
Deductions (8%) 962
b) Depending on whether Sabin chooses the simplified version or the regular method, his business expenses of $5,000 are deductible in addition to the above, from his business gross income of $24,000.