Problem:
Darrell is a self-employed consultant who uses 15% of his home exclusively as an office. Darrell operates completely out of his home office and makes all his appointments from the office as well as keeping his books and records in his office. Darrell's gross income from his consulting business is $60,000 in 2014. He incurs $6,000 of expenses directly related to his business, such as computer and office supplies. Below are expenses that related to Darrell's residence for 2014:
| Real estate taxes |
$ 4,000 |
| Mortgage interest |
8,000 |
| Insurance |
1,000 |
| Depreciation |
4,000 |
| Repairs and utilities |
1,000 |
|
$ 18,000 |
Required:
Question 1: Which of the above expenditures (if any) are deductible? Are they for or from AGI deductions?
Question 2: How would your answer change if Darrell was an employee of a consulting company and maintained an office at home in order to bring work home with him so he does not have to stay late at the office?
Note: Please show basic calculation