Using Your Home as an Office

Latest posts by Mariah Tompkins (see all)

Using your home as an office can be an advantage

As a young or potential entrepreneur, taking out office space rental seems like a daunting idea right? It’s a big commitment, especially when there is an alternative.

This is a topic which I encounter all the time. With a growing number of people working from home nowadays, claiming the cost of rent (if they are renting) or their mortgage repayments (if they own the house) is becoming a hot topic, with most people thinking they can claim the full amount and that being that. Unfortunately, it’s not as straightforward as that. Yes, you are allowed to claim a certain amount of “use of home as office,” but this depends on many factors, including how many hours you work at home and how many rooms your house contains.

You are able to claim a proportion of costs incurred for:

  • Mortgage or rent
  • Heating, water, gas and electricity.
  • Council tax
  • Insurance (if you pay an extra premium) for using your home as an office
  • Broadband and telephone

You have to determine:

  1. How many hours you work in the house?
  2. Have you got a room set aside for purely business use?
  3. What the exact total annual cost of your mortgage/rent is?

Lets run through a few case studies to help break it down for you:

Heating – Assuming you work full time from home and that you have a 5 room house with 1 in full time business use, where the rooms cover an equal proportion therefore using up an equal amount of the heating costs. Let’s say that the total costs incurred during the year are $1500.00, The amount you can claim will be 1500/5 = $300. Then you’ll have to apply this method to mortgage/rent, council tax etc. to work out the total amount you can claim.

If you don’t work full time from home, you’ll have to work out how many hours you spend in the room and use the same principle as above but proportion the amount accordingly. You have to be careful when working this out and ensure you keep copies of all the necessary records and calculations you used to work out your total ‘use of home as office’ costs.

Alternatively if you don’t want the hassle of working all the proportions out, you can use the flat rate method which goes off the numbers of hours you are working from home.

  • 25-50 hours: $15 per month
  • 51-100 hours: $40 per month
  • 101 hours or more: $56 per month

Using this method will definitely be quicker than working out your actual costs. However, the figure may not end up quite as high, it’s also important to note that the flat rate method only covers the cost of heating, light and power and broadband and telephone. You will still be required to work out your other costs using the method illustrated above.

In the end working at home has it’s advantages, savings and possible deductions, so be sure to check with your accountant as deduction allowances differ around the globe.

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