1. What portion of her eligible home expenses may Camille claim as tax-deductible expenses if the expenses...

Question:

1. What portion of her eligible home expenses may Camille claim as tax-deductible expenses if the expenses are allocated on the basis of (a) area?

2. What is her net business income if Camille allocates home expenses on the basis of area?

3. For most individuals, basic federal income tax equals the federal tax calculated according to Table 3.3, less non-refundable tax credits. What is Camille’s basic federal income tax if she reports a non-refundable tax credit of $12,138? Federal tax is reduced by 15% of total non-refundable tax credits.

4. What percent of Camille’s business income is basic federal income tax?

5. What percent of Camille’s taxable income is basic federal income tax?

Camille operates a child care service from her home. Her gross business income for 2018 amounted to $42 350. Her tax-deductible business expenses consisted of the following:

Advertising ...................................................................... $1700
Dues, memberships, subscriptions ................................. 520
Motor vehicle expenses .................................................. 1115
Supplies .............................................................................. 582
Meals and entertainment ................................................ 495
Other expenses ................................................................. 437

Camille can also deduct home expenses, such as utilities, property taxes, house insurance, mortgage interest, and maintenance for the business use of a workspace in her home. The amount that may be deducted is a proportion of the total annual home expenses allocated to the workspace on a reasonable basis, such as area or number of rooms. Camille’s eligible home expenses for the year were:

Heat .................................................. $3750
Power ................................................. 2480
Water ................................................... 610
House insurance .............................. 1420
Maintenance ..................................... 1930
Mortgage interest ............................ 6630
Property taxes ................................. 3260
Other expenses ................................. 690

The house covers 345 square metres and consists of eight rooms. Camille uses one room with an area of 45 square metres as her business office.

Table 3.3

Taxable Income (income tax brackets) Tax Rates $46 605 or less 15% of taxable income less than or equal to $46 605; plus Over $46 605 up to $93 208 20.5% of taxable income greater than $46 605 and less than or equal to $93 208; plus Over $93 208