Nancy is a self-employed consultant who uses 10% of her residence as an office. The office is used exclusively for business and is frequented by customers on a regular basis. Nancy also uses her den as an office (10% of the total floor space of her home) to prepare bilk and keep records. However, the den is also used by her children as a TV room. In 2019, Nancy’s net income from the consulting business (other than her home office expenses) amounts to $40,000 in 2019. She also incurs $1,400 of expenses directly related to the office (e.g., painting of the office, window blinds). Nancy incurs the following expenses in 2019 related to her residence:
|
Real estate taxes |
$2,000 |
|
Mortage interest |
5,000 |
|
Insurance |
500 |
|
Depreciation |
3,500 |
|
Repairs and utilities |
1,000 |
|
Total |
$12,000 |
a. Which of t he expenditures above (if any) are deductible for 2019? Are they for AGI or from AGI deductions?
b. Would your answer to Part a change if Nancy’s net income from consulting were only $2,500 for the year?
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