Anna is a self-employed newspaper columnist who does her work exclusively from a home office. Anna had a bad year and her taxable income from her business is only $2,000 before the home office expenses this year. Her office takes up 250 square feet of
her 1,000 square foot apartment. The total expenses for her apartment are $8,000 for rent, $1,000 for utilities, $200 of renter's insurance and $800 for pest control and other maintenance. What is Anna's home office deduction? Please show your calculations.
$2,000 . The total costs of her apartment ($8,000 + $1,000 + $200 + $800) are multiplied by the 25 percent (250/1,000 square feet) home office allocation to arrive at a $2,500 deduction for home office expenses. The expenses allowed are limited to her taxable income from the business, or $2,000 . The remaining $500 of home office expenses are carried forward to the following tax year.
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