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A common question that we get asked, is “what portion of my home expenses am I able to claim for tax purposes?”

Where a self-employed taxpayer uses his or her home partly in furtherance of the conduct of a business, he or she is entitled to a partial deduction for the outgoings which relate to the use of the home for the work related activities. These include:
– Heating
– Lighting
– Rates
– Insurance
– Mortgage interest
– House and contents insurance
– Repairs and maintenance
– Telephone rental

The portion of outgoings deductible is based on the area used for the business, expressed as a percentage of the total area of the home:

Area used for business purposes/Total area of home

It is not necessary for your home to be physically changed to suit the business.

Examples of areas likely to be used for business purposes include:-
An office or office area
A storeroom or storage area
A workshop
A garage or part of a garage which is used to house a business vehicle

Conclusion

The amount that you are able to claim for your home office will depend on your individual situation. Most people who are self employed find that it is impossible to completely separate business life from home life. Keep written workings of your calculations, and be sure to keep records of your outgoings in a safe place.

For those of you using Xero, this process can be streamlined by paying the expenses from your business account, and setting up a bank rule to split the non-deductible portion to drawings, and the deductible portion to Home Office Expenses.