[ Name]

Home Office Tax Benefits Comparison—Input

[Date]

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Basis (Homeowners only)

Purchase price of house $150,000
Land included in purchase price $50,000
Permanent improvements $10,000
Month started using office (1-12) 6
Year started using office 2004
Fair market value on date started $230,000
Land included in fair market value $75,000
Total basis in house $110,000

Business Percentage
Square footage of house 2500
Square footage of office 250
Number of rooms in house 11
Number of rooms in office 1
Business percentage 10.00%

Estimate of Annual Indirect Expenses Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Mortgage interest 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000
Real estate taxes 1,700 1,700 1,700 1,700 1,700 1,700 1,700 1,700 1,700 1,700
Homeowner's insurance 250 250 250 250 250 250 250 250 250 250
Mortgage insurance 200 200 200 200 200 200 200 200 200 200
Repairs and maintenance 400 400 400 400 400 400 400 400 400 400
Rent (Non-homeowners only) 0 0 0 0 0 0 0 0 0 0
Utilities 850 850 850 850 850 850 850 850 850 850
Casualty loss 0 0 0 0 0 0 0 0 0 0
Other expenses 0 0 0 0 0 0 0 0 0 0

Estimate of Annual Direct Expenses

Repairs and maintenance 800
Other

Estimate of Annual Business Income

Business income 5,000 10,000 20,000 40,000 50,000 60,000 70,000 75,000 75,000 75,000
Business expenses other than office 7,000 9,000 5,000 5,000 7,000 8,000 9,000 9,000 9,000 9,000
Net business income before office -$2,000 $1,000 $15,000 $35,000 $43,000 $52,000 $61,000 $66,000 $66,000 $66,000

Estimate of Other Annual Earned Income

Earned income as employee 40,000 40,000 0 0 0 0 0 0 0 0
Income tax rate 15% 15% 15% 15% 15% 15% 15% 15% 15% 15%

House Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Sales value of house $150,000 $160,000 $165,000 $170,000 $175,000 $180,000 $185,000 $190,000 $195,000 $200,000
[Name]
Estimated Tax Savings from Home Office Deduction
[Date]

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Indirect Expenses Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Mortgage interest 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000
Real estate taxes 1,700 1,700 1,700 1,700 1,700 1,700 1,700 1,700 1,700 1,700
Insurance 450 450 450 450 450 450 450 450 450 450
Repairs and maintenance 400 400 400 400 400 400 400 400 400 400
Utilities 850 850 850 850 850 850 850 850 850 850
Casualty loss 0 0 0 0 0 0 0 0 0 0
Other expenses 0 0 0 0 0 0 0 0 0 0
Total indirect office expenses 6,400 6,400 6,400 6,400 6,400 6,400 6,400 6,400 6,400 6,400

Business percentage 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
Deduction for indirect expenses 640 640 640 640 640 640 640 640 640 640

Direct expenses 800 0 0 0 0 0 0 0 0 0

Total expenses before depreciation 1,440 640 640 640 640 640 640 640 640 640

Depreciation 153 282 282 282 282 282 282 282 282 282

Total business use of home expense 1,593 922 922 922 922 922 922 922 922 922
Carryover from prior year 1,123 575 0 0 0 0 0 0 0

Net income before business use of home (2,000) 1,000 15,000 35,000 43,000 52,000 61,000 66,000 66,000 66,000

Allowed business use of home deduction 0 1,000 1,497 922 922 922 922 922 922 922
Net business income (2,000) 0 13,503 34,078 42,078 51,078 60,078 65,078 65,078 65,078

Deduction not allowed 1,593 1,045 0 0 0 0 0 0 0 0

Interest and taxes allowed as itemized deduction 470 470 0 0 0 0 0 0 0 0
Carryover of business use of home expenses 1,123 575 0 0 0 0 0 0 0 0

Tax savings from business use of home

Income tax 0 150 225 138 138 138 138 138 138 138
Self-employment tax 0 0 229 141 141 141 141 141 141 141
Total tax savings 0 150 454 279 279 279 279 279 279 279

Less: tax savings allowed on interest and taxes 71 71 71 71 71 71 71 71 71 71

True tax savings 0 80 383 209 209 209 209 209 209 209

Cumulative tax savings 0 80 463 671 880 1,089 1,298 1,507 1,716 1,925
[Name]
Estimated Tax Due on Sale of House
[Date]

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Selling price $150,000 $160,000 $165,000 $170,000 $175,000 $180,000 $185,000 $190,000 $195,000 $200,000
Original cost 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000
Depreciation claimed 153 435 717 999 1,281 1,563 1,845 2,127 2,409 2,691
Basis 99,847 99,565 99,283 99,001 98,719 98,437 98,155 97,873 97,591 97,309
Gain on sale 50,153 60,435 65,717 70,999 76,281 81,563 86,845 92,127 97,409 102,691
Business percent 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
Taxable gain 5,015 6,044 6,572 7,100 7,628 8,156 8,685 9,213 9,741 10,269
Tax on sale $752 $907 $986 $1,065 $1,144 $1,223 $1,303 $1,382 $1,461 $1,540
 A B C D E F G H I J K L M N
1 [Company Name]
2 Supporting Tables
3 [Date]
4
5 Nonresidential Real Property Mid-Month Convention
6 Straight-Line—39 Years
7
8 Month Property Placed in Service
Year
9 1 2 3 4 5 6 7 8 9 10 11 12
10 1 2.461% 2.247% 2.033% 1.819% 1.605% 1.391% 1.177% 0.963% 0.749% 0.535% 0.321% 0.107%
11 2 - 39 2.564% 2.564% 2.564% 2.564% 2.564% 2.564% 2.564% 2.564% 2.564% 2.564% 2.564% 2.564%
12 40 0.107% 0.321% 0.535% 0.749% 0.963% 1.177% 1.391% 1.605% 1.819% 2.033% 2.247% 2.461%
13
14
15 Rate used in year 1:
16 1.391%
17 0.000%
18 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
19 Maximum self-employment income for SS 87,900 87,900 87,900 87,900 87,900 87,900 87,900 87,900 87,900 87,900
20 Self-employment income 38,000 40,000 13,503 34,078 42,078 51,078 60,078 65,078 65,078 65,078
21 Earned income as employee 40,000 40,000 0 0 0 0 0 0 0 0
22 Taxable self-employment income 0 0 12,470 31,471 38,859 47,170 55,482 60,099 60,099 60,099
 Breakeven on Home Office Deduction
2,000
1,900
1,800
1,700
1,600
1,500
1,400
1,300
1,200
Dollars

1,100
1,000
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500
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