Problem 3-23 Office in the Home (LO 3.11)

Cindy operates a computerized engineering drawing business from her home. Cindy maintains a home office and properly allocates the following expenses to her office:

Depreciation	$1,500
Utilities	500
Real estate taxes	325
Mortgage interest (100 percent deductible)	500

a. Assume that Cindy earns income of $4,400 from her business for the year before deducting home office expenses. She has no other expenses associated with the business.

Calculate Cindy's deduction for home office expenses. $ ?

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Some taxpayers operate a trade or business in their homes and qualify for home office deductions. The tax law imposes strict limits on the availability of the deduction. In fact, the deduction for an office in the home is allowed by exception, of which there are four.

b. Assume that Cindy earns income of $2,600 from her business during the year before deducting home office expenses.

Calculate Cindy's deduction for home office expenses. $ ?