**Home Office Deduction Analysis: Understanding Cindy's Deductions**Cindy maintains an office in her home that comprises 8% (200 square feet) of total floor space. Gross income for her business is $42,000, and her residence expenses are as follows:| Expense Category | Amount ||------------------------------|----------|| Real property taxes | $2,400 || Interest on mortgage | $4,000 || Operating expenses | $2,200 || Depreciation (based on 8% business use) | $450 |**Graph/Diagram Explanation:**The table above outlines Cindy's primary residence expenses applicable for deductions. These are categorized into real property taxes, mortgage interest, operating expenses, and a calculated depreciation for 8% business use.**Home Office Deduction Calculation Methods:**1. **The Regular Method:** - Calculates deduction based on the percentage of the home devoted to business use. - Includes direct and proportional indirect expenses related to business activity.2. **The Simplified Method:** - Allows a standard deduction of $5 per square foot of home used for business, up to a maximum of 300 square feet.**Assignment:**Calculate Cindy’s office in the home deduction using both:a. The Regular Methodb. The Simplified MethodThis exercise will help you understand which method offers greater advantages and how different factors influence the deductible amount.

calculation of Cindy's office in the home deduction under regular method and simplified method are…

LO.5 Cindy maintains an office in her home that comprises 8% (200 square feet) of total floor space. Gross income for her business is $42,000, and her residence expenses are as follows: Real property taxes Interest on mortgage Operating expenses Depreciation (based on 8% business use) $2,400 4,000 2,200 450 What is Cindy's office in the home deduction based on: a. The Regular Method?

LO.5 Cindy maintains an office in her home that comprises 8% (200 square feet) of total floor space. Gross income for her business is $42,000, and her residence expenses are as follows: Real property taxes Interest on mortgage Operating expenses Depreciation (based on 8% business use) $2,400 4,000 2,200 450 What is Cindy's office in the home deduction based on: a. The Regular Method?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Steven is an accountant and maintains an office in his home. Expenses of the business (other than home office expenses) are $15,000. Steven incurs the following home office expenses: Real property taxes on residence: $2,400 Interest expense on residence: $4,000 Operating expenses of residence: $3,200 Depreciation on residence (based on 8% business use): $450. His office occupies 10% of the total floor space of his residence. Gross income from his business is $34,000. Assuming that Steven uses the regular method, what is his allowable office in the home deduction?
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