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 (12% of the total floor space of her home) to prepare bills and keep records. However, the den is also used by her children as a TV room. In 2023, Nancy’s net income from the consulting business (other than her home office expenses) amounts to \($40,000\) in 2023. 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 2023 related to her residence:

a. Which of the expenditures above (if any) are deductible for 2023? 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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Real estate taxes Mortgage interest Insurance Depreciation Repairs and utilities Total $ 2,000 5,000 500 3,500 1,000 $12,000