Darrell is a self-employed consultant who uses 15% of his home exclusively as an office. Darrell operates completely out of his home office and makes all of his appointments from the office as well as keeping his books and records in the office. Darrell’s gross income from his consulting business is $60,000 in 2017. He incurs $6,000 of expenses that are related to his business, such as computer and office supplies. Below are expenses that relate to Darrell’s residence for 2017:

Real estate taxes ……………………….$ 4,000

Mortgage interest ………………………..8,000

Insurance ……………………………….......1,000

Depreciation …………………………….....4,000

Repairs and utilities ……………………..1,000

Total ……………………………………......$18,000

a. Which of the above expenditures (if any) are deductible? Are they for AGI or from AGI deductions?

b. How would your answer change if Darrell was an employee of a consulting company and maintained an office at home in order to take work home with him so he did not have to spend so many hours at his consulting company office?