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

question 74

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 400 square feet. The size of her entire home is 2,400 square feet. During the year, Mercury received $6,300 of gross income from her business activities and she reported $2,500 of business expenses unrelated to her home office. For her entire home in the current year, she reported $3,500 of mortgage interest, $1,000 of property taxes, $600 of insurance, $500 of utilities and other operating expenses, and $3,200 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:

Valve-Regulated Lead-Acid

A type of lead-acid battery that is sealed, using valves to control gas release and prevent water loss, often used in portable and backup applications.

Recombinant Type Battery

A battery that combines different technologies, typically involving the recombination of hydrogen and oxygen to produce water and electricity.

Electrolyte

A substance that produces an electrically conducting solution when dissolved in a polar solvent, such as water, essential for the operation of batteries.

Armature

In electrical engineering, the rotating coil or coils of a dynamo or electric motor.