Part 2 Business Income and Deductions question: home office deduction

Part 2Business Income and Deductions

Lu uses 400 square feet of her home regularly and exclusively as her principal place of business and elects the simplified method for 2025. Her business has ample income. What is her home office deduction?

A $500
B $1,200
C $1,500
D $2,000

Show the answer and explanation

Answer: C. $1,500

The simplified method allows $5 per square foot of qualifying space, up to 300 square feet: $5 x 300 = $1,500. No depreciation is claimed, and mortgage interest and taxes stay deductible on Schedule A. Source: Rev. Proc. 2013-13; Pub. 587 (2025), Simplified Amount. Tax year: 2025 (law as of 31 Dec 2025).

Common mistake

Ignoring the 300-square-foot cap.

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Original study material mapped to the public IRS SEE content outlines; not a real exam question.Not affiliated with or endorsed by the IRS or PSI. Verify figures and rules against current guidance before relying on them.