Question

Travis has a 2,400 square foot home. He is a sales representative for a pharmaceutical company and uses one room of his home exclusively for his business. The area of the office is 240 square feet. During the past year, he painted his office and replaced the door at a cost of $500; paid for utilities for his home, $3,000; paid property taxes, $1,500; paid mortgage interest, $3,600; and replaced a door jam and door for his patio, $600. Travis has________$ in deductible direct expenses and________$ in deductible indirect expenses.

Answer 1

Answer:

Travis has $500 in deductible direct expenses and $810 in deductible indirect expenses.

Explanation:

Deductible direct expenses include all the home office expenses and reparations that directly affect the part of the house used as home office = $500 (painted his office and replaced the door).

Deductible indirect expenses include the prorated costs that include the whole house. Since the office occupies 240/2,400 = 10% of the house, then 10% of the indirect costs can be deducted:

• utilities $3,000 x 10% = $300
• property taxes $1,500 x 10% = $150
• mortgage interest $3,600 x 10% = $360
• total = $810