Home Office Deduction

Nora’s Home Office Deduction
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Nora’s Home Office Deduction
Memorandum
DATE: December 30, 2022
TO: Nora
FROM: Your Tax Advisor
SUBJECT: Your Home Office Deduction
The government allows individuals who entirely and frequently use sections of their homes to conduct commercial activities to deduct costs for those parts. The expenditures include interest on home loans, insurance, maintenance costs, utility expenses, and depreciation for such sections. Therefore, business people should calculate the fractions of their homes they dedicate to commercial activities, maintenance costs, utility expenses, and depreciation. According to TurboTax (2020), in 2022, each square foot attracts a prescribed tax rate of $5, and the maximum number of square feet is 300. For instance, for an office measuring 100 square feet, the deduction would be 100 X $5, which is $500. Still, the area should be entirely devoted to commercial activities.
Governments require enough taxes to help them get adequate income to meet public service demands. When revenue grows yearly and adequately funds a nation’s increasing cost of services, the government keeps the rates reasonably low as long as there are sufficient business activities that it can tax. To evaluate your suitable tax situation, I will assess the tax system’s fairness and how simple it is to comply with the tax system. Zodrow (n.d) asserts that a fair tax system allows people and companies to pay taxes according to the benefits they get from government services, and the persons must be able to pay the tax. On the one hand, fairness means that if specific individuals are poor, the government must exempt them from paying taxes to finance public services. This opinion supports the “federal personal income tax structure, as the standard deduction and personal exemptions imply that income roughly equal to that associated with the poverty level is tax-free” (Zodrow, n.d, p. 19). On the other hand, tax fairness means that all individuals should contribute some money to finance government services irrespective of their income levels. This opinion infers that it is equitable to tax small-income people and offer them some deductions proportionally.
Unfortunately, you do not qualify for any deductions for your home office in 2022. Before the TCJA (Tax Cuts and Job Act), which the government passed in 2017, the authorities allowed workers to subtract unreimbursed employee business expenditures, which comprised the home office deduction (TurboTax, 2020). Nevertheless, TurboTax (2020) asserts that the government removed the employee’s business expenditures’ deductions from 2018 to 2025. Were it not for eliminating the deductions and assuming your assessed tax is $21,420,...