Home Office Tax Expenses

Home Office Tax Expenses

It is expected that a business owner will claim home office tax expenses if their small business is run from home. This should be done to reduce the amount of tax that has to be paid.

The office or workshop space used needs to be the principal place from which the business is run and it needs to be used regularly.

The office or workshop space needs to be used solely for business for claims to be made.

If the dining room table is used to do office work and then also used for dinner and where the kids do their homework and where mother does sewing, or any other personal or family activity then this cannot count as office space upon which to claim home expenses.

If there is no spare room available the owner should set up a corner of a room that has space as an office, put a small table or desk there and only use it for business activities.

Claimable Expenses

Interest on mortgage
Keep a good record of the interest paid towards the home loan so these can be included in the home office calculations.
Unfortunately, the principal payments cannot be claimed as these are viewed as capital items, which is the same for ordinary financial loans for a business too.

Local utility or council rates
You can claim a portion of whatever rates apply in your area for home owners such as water, sewer, rubbish removal etc.

General repairs and maintenance
This only applies if the repairs or maintenance are carried out in the specific office area along with the rest of the home.
It does not apply to improvements as this is a capital expense. The two need to be distinguished carefully.
If the repair or maintenance was only done in the specific office space the claim is fully deductible.
On the other hand, if the dining room or bedroom had some work done on them but the office in another part of the house had no work done on it.. then nothing can be claimed... pretty logical really!

This includes heating and lighting.

If the business owner lives and works from a rented home as a sole trader they may be able to claim rent.
However, if the director of a limited or incorporated business is running the business out of their rented home they may be able to charge the business a portion of rent.
This then becomes a deductible business expense for the business and a home office claim for the director on their personal tax return.

This is for home and contents insurance only. It does not apply to life insurance which is not counted as a home office tax expense.

This is for the depreciation on the home and on other capital equipment such as the computer and printer in the office.

The home owner should keep thorough records of all personal expenses for the year as detailed below. These details then need to be provided to the tax accountant at the end of the year to be included in the tax calculations.

It is assumed that all of the above bills will have been paid by the owner from their personal funds. If any of them were paid using business funds then the amount needs to be split in the business bookkeeping cash book between the percentage of the home office (coded to the name of the expense), and the percentage of the home (coded to Drawings).

Note that only a portion of these is claimable as home office tax expenses and the values depend upon the size of the space used as an office or workshop, see how to calculate the percentage below.

Home Office Tax Expenses Spreadsheet in Excel

Use this spreadsheet in excel to record your monthly bills for the home. There is also a cell in which you can enter the percentage you are allowed to claim, (see further below for details on calculating this). This will give you the final total that you can claim at the end of year to reduce your taxes. Click on the image for the free excel download.

Home Office Tax Expenses Spreadsheet in Excel

Calculating the Claimable Portion

Home Office Tax Expenses

The business space is calculated as a percentage of the house.

The office or workshop needs to be measured and the whole house needs to be measured to arrive at the square footage of each.

Then divide the office+workshop area by the house area.

Use this online percentage calculator :-

    A will be the total measurement of your home office space, and 

    B is the total measurement of your home (excluding the garden please!)

    Result % is the percentage you can multiply against your total bill payments.

Here is a practical example:-

Tom Green Handyman

House measurement = 1200 sq ft Business area = 300 sq ft (workshop plus office both used solely for the business)

Percentage : 300 / 1200 = 0.25 ........... Home Portion = 25%

If Tom pays $5,000 interest on his mortgage for a year the claimable portion is $5,000 multiplied by 0.25 = $1,250

There may be a threshold on the maximum percentage allowed for claiming home office tax expenses and this will need to be checked out with the local tax authorities. 

Home Telephone Used for Business Calls - A good way of claiming home telephone expenses is to pay the monthly bills using business funds.

Then in the bookkeeping system split the personal calls to 'drawings' and code the business calls to 'telephone'.

However, this may be a time consuming task every month if there are many calls so it could be simplified by doing the above for just three months and calculating the percentage of business calls.

This percentage would then be used on all telephone bills for the rest of the year.

To keep the tax man happy if he checks up on things you need to keep copies of these bills handy as proof of how you calculated the percentage.

Depending on where you live you may be able to claim 50% of the line rental.

Use of Private Vehicle - Well obviously this isn't part of the home, but it is another really good expense to claim.

It will be necessary to keep a log of the mileage pertaining to business use. Once again, to keep the tax man happy, a very good record needs to be maintained.

This means recording the date, the place started from and the place going to; the odometer reading at the start of the trip, the odometer reading at the end of the trip, the total distance for that trip and the reason for the trip. (Pre-printed log books are available from stationery outlets or a ruled school exercise book will suffice).

Once again, you could do this for three months, calculate the total business mileage and multiply that by the tax department mileage rates, and apply this to the rest of the year.

Sole Proprietor Tax Deductions

A sole trader who has a small number of business transactions may forgo using an accountant to prepare end of year accounts and taxation.

They may prepare their own tax returns based on their bookkeeping information utilizing the list of deductible business expenses, and they will have to calculate their home usage as discussed above.

There will be tax forms to complete to show these home expenses along with the business ones.

Below are some excellent resources about home office tax expenses.  Just click on the one that relates to the country you are in - it will take you directly to the relevant tax department for that country. We have only listed the top countries that use this website. If you need to find your country just do an internet search using the phrase "self-employed home office expenses [name of country]".

Canada – CRA
Ireland - Revenue
Australia – ATO
South Africa

Yes! Send me your free eBook -
"Bookkeeping Forms and Templates.

Email address

First name

Your email privacy is important to us

You are here:

Home Office Tax Expenses

Facebook Comments

Have your say about what you just read!
Leave me a comment in the box below.

Recent Articles

  1. Free Week Long Online Seminar

    Oct 14, 16 12:16 AM

    Putting time in to your online business but not seeing the results you want? Between 24-28 October join 10,000 like-minded women entrepreneurs for the free virtual summit guaranteed to make your incon…

    Read More

  2. Wave Accounting - Free Software

    Oct 12, 16 12:43 AM

    Check out Wave Accounting, a 100% free accounting program perfect for service based businesses. It can be used world-wide as you can customize your sales tax options and connect your bank account.

    Read More

  3. What is a Trial Balance?

    Oct 05, 16 10:41 PM

    What is a Trial Balance? Check out this Trial Balance example and information

    Read More

Back to Top: Home Office Tax Expenses