-personal residence land and building value (lesser of cost or fair market value at date converted to business use) $125,000
-less land value 25,000
-gives building value $100,000
-times the percent of business use (divide sq ft of office by total sq ft of bld) x 10%
-gives a dollar value for office in home $ 10,000
-depreciation expense if put in service 1/1/00 ($10,000 divided by 39 year) $ 256
-plus home real estate taxes, mortgage interest and other expenses for entire bld. - utilities, insurance, repairs $ 7,000
-times the percent of business use x 10%
-gives business percent of r.e. tax, util, repairs, ins $ 700
-gives total office in home expenses $ 956
-times your estimated tax bracket (10%, 15%, 25%, 28%, 33%, 35%) x 15%
-equals your tax savings if you are in the 15% tax bracket $ 143
Not a whole lot of tax savings for all of the effort in this EXAMPLE. Of course your tax savings will be more or less depending upon your actual numbers, and your actual tax bracket.
Note: This is only a simplified EXAMPLE, and is not to be used in the preparation of any tax return. Consult with your personal tax advisor, regarding your particular situation, regarding office in home rules and filing requirements.