Home Office Expenses: What You Can Claim for Tax

Using Your Home For Business? You Can Claim a Portion of Household Expenses

Claiming home office expenses can cut your tax bill – but only if you do it right.

Get it wrong, and you risk over-claiming (which could trigger IRD scrutiny) or missing out on deductions you’re entitled to.

Here are 9 rules and tips to help you get it right and maximise your claim.

1. Claiming home office expenses can cut your tax bill – but only if you do it right.

Home office expenses are costs incurred when part of your home is used for business purposes.

If you’re a business owner and work from home, you may be able to claim a portion of your household expenses as a business expense.

2. What Expenses Can You Claim?

Costs where there’s a clear connection between your home use and business income.

Examples include:

• Depreciation on capital items (e.g., computers, office furniture)
• Rent or mortgage interest
• Rates and insurance
• Power, internet, and other utilities

3. How Much Can You Claim?

The claimable amount is based on the proportion of your home used for business.

Typically, you must set aside a specific area for business use (e.g., an office or storage space). If no dedicated space is set aside, apportionment should consider both the area used and the time spent working from home.

• Private or domestic expenses cannot be claimed.
• To ensure compliance, keep detailed records of expenses and calculations to support your claim.

4. What You Cannot Claim

If an expense doesn’t directly contribute to business income, it can’t be claimed.

Examples include:

• Personal or private expenses (e.g., full home rent, groceries, non-business utilities).
• Mixed-use expenses (unless properly apportioned).

5. How to Split Home Office Expenses

To claim home office expenses correctly, you must split costs between business and personal use. There are two methods:

Method 1: Actual Expenses Method

This method calculates deductions based on the proportion of your home used for business.

• You can claim a portion of utilities, mortgage interest, rates, rent, and other home-related costs.
• The percentage is based on both the area used for business and the time spent working from home.
• Detailed record-keeping is required, as you must track actual costs and apply a fair and reasonable apportionment.
• Best for: Those who prefer greater precision and are willing to keep detailed records.

Method 2: Square Metre Rate Method

This simpler method allows you to calculate deductions using a fixed rate per square metre of your home office.

• The rate is set by the Commissioner of Inland Revenue each year, and is based on the average cost of utilities per square metre.
• Mortgage interest, rates, or rent are not included in this rate, but you can claim them separately by applying the business-use percentage.
• If this option is used, you cannot claim any other expenses or depreciation costs in relation to the business use of your home.
• Less record-keeping required—you don’t need to track utility costs individually.
• Best for: Those who prefer simplicity and want to minimise compliance effort.

Which Method Should You Use?

Both methods have their advantages, and the best option depends on your business setup and preference for simplicity vs. precision.

If you’re unsure which one works best for you:

• I’ve created a free Excel calculator to help you quickly work out your home office expenses.
• You’ll find the download link at the end of this article.

6. GST Considerations

If you’re GST-registered, you can claim the GST portion of home office expenses in your GST returns.

Key considerations:

If you’re GST-registered, you can claim the GST portion of home office expenses in your GST returns.

Key considerations:

• GST can only be claimed on GST-inclusive expenses
• Adjustments may be required if business use changes over time

7. Record Keeping: Proof is Everything!

Accurate records is a must to support your claims. Keep:

• Invoices and receipts for all expenses
• Expense calculations showing how you determined business use
• Supporting documents in case of an IRD review

Documentation will be crucial if your claims are ever reviewed by Inland Revenue.

8. Review and Adjust Your Claims Regularly

Your home office setup may change over time—so should your tax claim.

When I moved homes last year, I updated my home office claim to reflect my new workspace. Since this happened midway through the tax year, I split my calculation – using different percentages for each space.

• If you move homes, update your calculations
• If your business use increases or decreases, adjust the claim accordingly

Keeping your claim up to date ensures you maximise deductions without over-claiming. Regularly review your home office setup and expenses, including reassessing the business use percentage if your work situation changes.

9. Can Salary Earners Claim Home Office Expenses?

Accurate records is a must to support your claims. Keep:

For employees, home office expenses are not tax-deductible due to the employment limitation in Section DA 2 of the Income Tax Act.

However, there’s an exception: If your employer reimburses you for home office costs, it may be tax-free under certain conditions.

Talk to your employer about reimbursement options.

Conclusion

Claiming home office expenses is a great way to reduce your tax bill, but accuracy is key.

By following these 9 rules and tips, you can maximise your deductions while staying IRD-compliant.

– Baqir Hussain, FCCA

Director, Finex Chartered Certified Accountants