Mercury Is Self-Employed and She Uses a Room in Her

question 91

Essay

Mercury is self-employed and she uses a room in her home as her principal place of business. She meets clients there and doesn't use the room for any other purpose. The size of her home office is 350 square feet. The size of her entire home is 2,500 square feet. During the year, Mercury received $11,000 of gross income from her business activities and she reported $3,600 of business expenses unrelated to her home office. For her entire home in the current year, she reported $3,450 of mortgage interest, $1,300 of property taxes, $760 of insurance, $820 of utilities and other operating expenses, and $4,200 of depreciation expense. What amount of home office expenses is Mercury allowed to deduct in the current year using the actual expense method? Indicate the amount and type of expenses she must carry over to the next year, if any. What amount of home office expenses is Mercury allowed to deduct in the current year using the simplified method?

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Definitions:

Mental Health Difficulties

Challenges related to emotional, psychological, or behavioral well-being that affect an individual's daily functioning.

Shoplifting Behavior

The act of deliberately taking goods from a store without paying for them, often analyzed from psychological, social, and legal perspectives.

Suicidal Ideation

Thinking about, considering, or planning suicide.

Low-SES Family

Families that are categorized as having low socio-economic status, often determined by income, education, and occupation, which may affect access to resources and opportunities.