Randi qualifies for a home deduction. The amount of space devoted to business use is $400$ square feet of the total $2,000$ square feet of her home. Randi's mortgage interest and property taxes in total are $$1,600.$ Other deductions properly allocated to the home office total $$300.$ In addition, Randi purchases and uses business supplies costing $$200$ during the year. Assume Randi earns income of $$3,400$ for the year before deducting any home office or supplies deduction.

Assuming Randi uses the simplified $($safe harbor$)$ method, calculate the largest deduction Randi can take for her home office $($ignore self$-$employment taxes$).$

Overall home office deduction limitation: $

Home office deduction under simplified method: $

Feedback

Check My Work

The home office deduction may not reduce the net income from the business below zero, except for mortgage interest and property taxes allocable to the office, which are generally tax deductible anyway.

Normally, the calculation of home office expenses involves the allocation of the total expenses of a taxpayer's dwelling between business and personal use. In an effort to reduce the complexity of the home office deduction, the IRS introduced a simplified method, the Optional Safe Harbor Method $($simplified method$).$ Under the safe harbor, the taxpayer may deduct home office expenses at the applicable rate multiplied by the number of square feet used in the home office, up to a maximum of $300$ square feet.